comet group consolidated financial statements · 2020. 1. 16. · 35 | | 2018 comet group...
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Comet Group Consolidated Financial Statements
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements34
35 Consolidated balance sheet 36 Consolidated statement of income 36 Consolidated statement of comprehensive income 37 Consolidated statement of cash flows 38 Consolidated statement of changes in equity 39 Notes to the consolidated financial statements 87 Report of the statutory auditor
The online version of the complete consolidated financial statements 2018 (incl. notes) is available on www.comet-group.com
Contents
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements35
In thousands of CHF Note Dec. 31, 2018 % Dec. 31, 2017 restated 1
% Jan. 1, 2017 restated 1
Assets
Cash and cash equivalents 43,007 60,420 74,832
Trade and other receivables 5 63,943 64,574 47,872
Other financial assets 6 26 277 152
Tax receivables 2,893 2,660 –
Inventories 7 91,090 102,825 92,372
Prepaid expenses 8 5,109 4,555 3,784
Total current assets 206,068 56.0% 235,311 60.4% 219,012
Property, plant and equipment 9 113,591 95,056 66,902
Intangible assets 10 40,827 51,647 49,703
Financial assets 6 209 239 234
Deferred tax assets 12 7,063 7,536 8,320
Total non-current assets 161,691 44.0% 154,478 39.6% 125,159
Total assets 367,759 100.0% 389,789 100.0% 344,171
Liabilities and shareholders' equity
Current debt 13 5,000 2,132 2,666
Trade and other payables 14 34,919 42,545 30,516
Contract liabilities 3 19,992 29,171 33,063
Other financial liabilities 6 379 2 184
Tax payables 870 3,131 5,408
Accrued expenses 15 20,316 25,758 18,048
Current provisions 16 12,080 10,140 7,842
Total current liabilities 93,555 25.4% 112,879 29.0% 97,727
Non-current debt 13 62,812 65,733 67,760
Non-current provisions 16 47 54 57
Employee benefit plan liabilities 17 11,307 8,438 5,546
Deferred tax liabilities 12 – 1,137 1,142
Total non-current liabilities 74,166 20.2% 75,362 19.3% 74,505
Total liabilities 167,721 45.6% 188,241 48.3% 172,232
Capital stock 28 7,760 7,754 7,745
Additional paid-in capital 18,496 29,303 37,576
Retained earnings 197,758 186,748 151,556
Foreign currency translation differences (23,976) (22,257) (24,938)
Total equity attributable to shareholders of Comet Holding AG 200,038 54.4% 201,548 51.7% 171,939
Total liabilities and shareholders' equity 367,759 100.0% 389,789 100.0% 344,171
1 Restated for IFRS 15 (see note 2.1).
Consolidated balance sheet
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements36
In thousands of CHF Note 2018 % 2017 restated 1
%
Net sales 3/4 436,356 443,370
Cost of sales (265,914) (262,495)
Gross profit 170,442 39.1% 180,875 40.8%
Other operating income 18 4,201 1.0% 4,093 0.9%
Development expenses 20 (53,882) – 12.3% (47,102) – 10.6%
Marketing and selling expenses (63,251) – 14.5% (57,006) – 12.9%
General and administrative expenses (32,953) – 7.6% (30,123) – 6.8%
Loss on disposal of businesses 21 (6,595) – 1.5% – 0.0%
Operating income 17,962 4.1% 50,737 11.4%
Financing expenses 23 (9,387) – 2.2% (6,971) – 1.6%
Financing income 23 6,562 1.5% 6,086 1.4%
Income before tax 15,137 3.5% 49,852 11.2%
Income tax 12 (2,858) – 0.7% (14,516) – 3.3%
Net income 12,279 2.8% 35,336 8.0%
Earnings per share in CHF, diluted and basic 24 1.58 4.56
Operating income 17,962 4.1% 50,737 11.4%
Amortization 11/22 10,655 2.4% 4,392 1.0%
EBITA 28,617 6.6% 55,129 12.4%
Depreciation 11/22 9,176 2.1% 8,074 1.8%
EBITDA 37,793 8.7% 63,203 14.3%
1 Restated for IFRS 15 (see note 2.1).
Consolidated statement of comprehensive income
In thousands of CHF Note 2018 2017 restated 1
Net income 12,279 35,336
Other comprehensive income
Foreign currency translation differences (1,719) 2,679
Total items that will be reclassified to the income statement on realization (1,719) 2,679
Actuarial losses on defined benefit plans 17 (913) (17)
Income tax 12 132 (2)
Total items that will not subsequently be reclassified to the income statement (781) (19)
Total other comprehensive income (2,500) 2,660
Total comprehensive income 9,779 37,996
1 Restated for IFRS 15 (see note 2.1).
Consolidated statement of income
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In thousands of CHF Note 2018 2017 restated 1
Net income 12,279 35,336
Income tax 12 2,858 14,516
Depreciation, amortization and impairment 9/10/11 19,831 12,465
Net interest expense 23 860 1,310
Share-based payments 29 340 916
Losses on disposal of property, plant and equipment 172 59
Losses on disposal of intangible assets 10 –
Loss on disposal of businesses 21 6,595 –
Other non-cash expense/(income) 3,125 2,537
Change in provisions 16 2,262 2,211
Change in other working capital (20,025) (12,188)
Interest received 30 14
Taxes paid (5,845) (18,823)
Net cash provided by operating activities 22,493 38,353
Outflow from disposal of businesses (293) –
Purchases of property, plant and equipment 9 (26,020) (37,554)
Purchases of intangible assets 10 (1,933) (3,953)
Disposals of property, plant and equipment 9 242 1,285
Disposals of intangible assets 10 1,039 –
Disposals of other financial assets 35 –
Net cash used in investing activities (26,930) (40,221)
Repayment of borrowings 13 (136) (2,656)
Interest paid (806) (1,247)
Distribution to shareholders of Comet Holding AG (11,630) (9,295)
Net cash used in financing activities (12,572) (13,197)
Net (decrease) in cash and cash equivalents (17,008) (15,065)
Foreign currency translation differences on cash and cash equivalents (404) 652
Cash and cash equivalents at January 1 60,420 74,832
Net cash and cash equivalents at December 31 43,007 60,420
1 Restated for IFRS 15 (see note 2.1).
Consolidated statement of cash flows
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Equity attributable to shareholders of Comet Holding AG
In thousands of CHF Capital stock Additional paid-in capital
Retained earnings
Foreign currencytranslation differences
Total shareholders’
equity
December 31, 2016 7,745 37,576 156,033 (25,009) 176,345
Restatement 1 (4,477) 71 (4,406)
January 1, 2017 restated 1 7,745 37,576 151,556 (24,938) 171,939
Net income 1 35,336 35,336
Other comprehensive income 1 (19) 2,679 2,660
Total comprehensive income 1 35,317 2,679 37,996
Distribution to shareholders of Comet Holding AG (9,295) (9,295)
Increase in capital (for stock compensation) 8 1,022 (1,005) 26
Share-based payments 880 880
December 31, 2017 restated 1 7,754 29,303 186,748 (22,257) 201,548
Net income 12,279 12,279
Other comprehensive income (781) (1,719) (2,500)
Total comprehensive income 11,498 (1,719) 9,779
Distribution to shareholdersof Comet Holding AG (11,630) (11,630)
Increase in capital (for stock compensation) 6 823 (909) (80)
Share-based payments 421 421
December 31, 2018 7,760 18,496 197,758 (23,976) 200,038
1 Restated for IFRS 15 (see note 2.1).
Consolidated statement of changes in equity
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The Comet Group (“Comet”, the “Group”) is one of the world’s leading vendors of x-ray, radio frequency (RF) power and ebeam technology. With high-quality components, systems and services, marketed under the “Comet”, “Yxlon” and “ebeam” brands, the Group helps its customers optimize the quality, reliability and efficiency of their products and processes. Yxlon x-ray systems for non-de-structive testing are supplied to end customers in the automotive, aerospace, electronics and energy sectors. Under the Comet brand, the Group builds compo-nents and modules such as x-ray sources, vacuum capacitors, RF generators and impedance matching networks, marketed to manufacturers in the automotive, aerospace, semiconductor and solar industries as well as for security applications at airports. Under the ebeam brand, the Group develops and markets compact ebeam sets for the treatment of surfaces in the food and printing industries.
The consolidated financial statements (except with respect to certain financial instruments) have been drawn up under the historical cost convention. The fis-cal year-end for the financial statements of all Group companies is December 31. These consolidated financial statements have been prepared in compliance with Swiss stock corporation law and International Financial Reporting Standards (IFRS). All IFRS in force at the balance sheet date and all interpretations (IFRIC) of the International Accounting Standards Board (IASB) were applied. Comet did not early-adopt new standards and interpretations except as specifically stated below. The significant accounting policies applied are unchanged from the prior year except as set out below.
Revised and new accounting rules With effect from January 1, 2018, Comet has applied the following new or revised IFRS / IAS for the first time:
■ IFRS 2 – Amendment – Classification and Measurement of Share-based Payment Transactions
■ IFRS 9 – Financial Instruments ■ IFRS 15 – Revenue from Contracts with Customers ■ IFRIC 22 – Foreign Currency Transactions and Advance Consideration ■ Annual Improvements to IFRS Standards, 2014–2016 Cycle
Except as described below, the first-time application of the above new or amended standards and interpretations had no effect on Comet’s financial position, results of operations and cash flows.
IFRS 15 – Revenue from Contracts with CustomersIFRS 15 supersedes IAS 11, Construction Contracts, IAS 18, Revenue, and the as-sociated interpretations, and provides accounting guidance for all sales revenue from contracts with customers. It excludes contracts that are within the scope of other IFRS standards. The new standard establishes a five-step model for the recognition of revenue from contracts with customers. Companies must exercise judgment in considering the contract terms and all relevant facts and circumstan-ces (including implied contract terms). Comet has elected to use the full retrospec-tive approach for the implementation of IFRS 15.
01 Nature of the business activities
02 Accounting policies
02.1 Changes in accounting policies
Notes to the consolidated financial statements
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The application of IFRS 15 has the following impact on items of the consolidated balance sheet:
In thousands of CHF January 1, 2017 December 31, 2017
Note Reported Adjustment Restated Reported Adjustment RestatedAssets
Trade and other receivables a 60,893 (13,021) 47,872 76,677 (12,103) 64,574
Inventories a 81,473 10,899 92,372 93,910 8,915 102,825
Prepaid expenses 2,651 1,133 3,784 3,410 1,145 4,555
Of which contract costs c – 1,133 1,133 – 1,145 1,145
Deferred tax assets 8,068 252 8,320 7,218 318 7,536
Other assets, not affected by IFRS 15 191 823 – 191 823 210 299 – 210 299
Total assets 344,908 (737) 344,171 391,515 (1,726) 389,789
Liabilities
Trade and other payables 58,153 (27,637) 30,516 66,667 (24,122) 42,545
Of which prepayments by customers b 28,770 (28,770) – 25,267 (25,267) –
Of which sales commissions c 3,099 1,133 4,232 3,529 1,145 4,674
Contract liabilities a, b – 33,063 33,063 – 29,171 29,171
Deferred tax liabilities 2,899 (1,757) 1,142 3,030 (1,893) 1,137
Other liabilities, not affected by IFRS 15 107 511 – 107 511 115 388 – 115 388
Total liabilities 168,563 3,669 172,232 185,085 3,156 188,241
Equity
Retained earnings 156,033 (4,477) 151,556 191,350 (4,602) 186,748
Foreign currency translation differences (25,009) 71 (24,938) (21,977) (280) (22,257)
Other equity, not affected by IFRS 15 45 321 – 45 321 37 057 – 37 057
Total equity 176,345 (4,406) 171,939 206,430 (4,882) 201,548
The application of IFRS 15 has the following impact on items of the consolidated statement of income:
In thousands of CHF Year to December 31, 2017
Note Reported Adjustment Restated
Net sales a) 438,355 5,015 443,370
Cost of sales a) (257,943) (4,552) (262,495)
Gross profit 180,412 463 180,875
Other operating income a) 6,580 (2,487) 4,093
Development expenses a) (48,967) 1,865 (47,102)
Marketing and selling expenses (57,006) – (57,006)
General and administrative expenses (30,123) – (30,123)
Operating income 50,896 (159) 50,737
Financing expenses (6,971) – (6,971)
Financing income 6,086 – 6,086
Income before tax 50,011 (159) 49,852
Income tax (14,551) 35 (14,516)
Net income 35,460 (124) 35,336
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements41
The changes resulting from IFRS 15 had no material impact on other comprehen-sive income. The impacts on the consolidated statement of cash flows were relat-ed only to the changes in net income and corresponding deferred taxes and the change in working capital. The cash flows from investing and financing activities were not affected.
The impacts on the consolidated balance sheet and statement of income are described below:
a) Revenue from contracts with customers
Sale of productsRevenue from the sale of products (including spare parts) is as a rule recognized on the basis of a single performance obligation, which is satisfied at a specific point in time. The performance obligation is satisfied, and the revenue recognized, when the customer acquires control of the product. Generally, the customer ac-quires control at delivery of the product or spare part. This applies to the PCT and IXT divisions and the engineering business of the EBT division. Here the adoption of IFRS 15 thus had no impact on the amount and timing of revenue recognition.
Sale of systemsIn the systems business, customers are supplied with comprehensive and some-times complex systems. Besides this equipment itself, the segment also provides services such as installation and complete integration into customers’ process-es. Under the new accounting standard these services are no longer regarded as separable, as they form an integral part of the delivery. Revenue from the sale of systems is thus as a rule recognized on the basis of a single performance obliga-tion, which is satisfied at a specific point in time. The performance obligation is satisfied when the customer has taken delivery of and accepted the system. This applies to the IXS division and the systems business of the EBT division. In the case of systems already delivered (with the risks and rewards thus having passed to the customer) for which there was not yet a certificate of acceptance, revenue and the related sales have been retrospectively restated.
Sale of servicesComet provides services related to products and systems. Warranty obligations that provide an additional service to the customer (service-type warranties), such as an extension of the warranty period, are separate performance obligations and the revenue associated with them is recognized over time. For general mainte-nance services and defect correction intended to ensure that the delivered good is, or performs, as specified in the contract (assurance-type warranties), the esti-mated cost of the liability is recognized as a provision in accordance with IAS 37. The treatment of warranty obligations did not result in a change in the amount or timing of revenue recognition. Revenue from other services such as repair or training continues to be recognized at a specific point in time as before.
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Sale of prototypesIncome from customers for research and development services is evaluated differently under IFRS 15 than before. After the delivery of the first prototype, further income received for research and development services is now classified as derived from the sale of prototypes and is reported as revenue.
b) Advance payments by customers and contract liabilitiesPrepayments by customers were reclassified to contract liabilities.
c) Contract costs and sales commissionsUnder IFRS 15, the sales commissions owed for agent activities are recognized at contract inception. As these represent incremental costs directly attributable to obtaining a contract, they are capitalized and a liability of equal amount is recog-nized for sales commissions. Their recognition as an expense occurs as soon as Comet has transferred control of the products or systems to the customer.
IFRS 9 – Financial InstrumentsIFRS 9 introduced new guidance for the classification and measurement of finan-cial assets and liabilities, the recognition of impairment losses, and hedge ac-counting. Comet applies IFRS 9 prospectively, with the comparative information continuing to be reported in accordance with IAS 39. At January 1, 2018 there were no available-for-sale financial assets, held-to-maturity investments, or finan-cial instruments at fair value through other comprehensive income. The financial assets and liabilities previously classified as at fair value through profit or loss continue to meet the criteria of this category. The other financial instruments are measured at amortized cost as before. Consequently, the classification of finan-cial instruments to the appropriate categories under IFRS 9 had no effect on the accounting treatment of assets and liabilities.
Under IFRS 9 the impairment of financial assets – including, specifically, trade re-ceivables measured at amortized cost – is now assessed using an expected credit loss model. This change did not have any material impacts on Comet’s financial assets.
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements43
Standard Expected impact
Effective date Planned adoption by Comet
Annual Improvements to IFRS Standards, 2015–2017 Cycle (1) Jan. 1, 2019 Fiscal year 2019
IAS 19 – Amendment – Plan Amendment, Curtailment or Settlement (1) Jan. 1, 2019 Fiscal year 2019
IFRS 16 – Leases (2) Jan. 1, 2019 Fiscal year 2019
IFRIC 23 – Uncertainty over Income Tax Treatments (1) Jan. 1, 2019 Fiscal year 2019
(1) Expected to have no, or no significant, impact on the financial position, results of operations and cash flows.
(2) From January 1, 2019, Comet will apply IFRS 16, Leases, for the first time. The full retrospective method was chosen for the implementation of this standard. Under the new guidance, lessees will be required to recognize most leases on their balance sheet and employ a right-of-use model to do so. Under this new model, at the inception of the lease, the lessee recognizes a right-of-use asset for the usage right, and a liability for the payment obligation to the lessor. The right-of-use asset is depreciated over the shorter of the term of the lease or the expected useful life. The lease payments are incurred for the right to use the leased asset over the term of the lease. Comet is affected by the new ac-counting guidance especially in its existing rental agreements for the use of buildings and in its vehicle leases. The following impacts arise for Comet:
■ Total assets and liabilities at January 1, 2018 are increased due to the cap-italization of the right-of-use assets within a range of about CHF 15 million to CHF 19 million and the recognition of the corresponding lease liabilities in a range of CHF 17 million to CHF 21 million, with a corresponding reduc-tion in the equity ratio by between 2.0 and 3.0 percentage points.
■ EBITDA for 2018 will improve by the amount of the eliminated operating lease expenses, i.e., the EBITDA margin will increase by between 1.0 and 1.5 percentage points. The EBIT margin and net income are expected to improve immaterially.
The contractual lease liabilities which did not previously require recognition in the balance sheet are already disclosed now, in note 25.2.
02.2 New accounting rules becoming effective in subsequent periods
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Comet’s consolidated financial statements contain assumptions and estimates that affect the reported financial position, results of operations and cash flows. These assumptions and estimates were made on the basis of management’s best knowledge at the time of preparation of the accounts. Actual results may differ from the values presented. The following estimates have the greatest effects on the consolidated financial statements:
■ Intangible assets (see note 10 and 11): For acquisitions, the fair value of the acquired net assets (including acquired intangible assets) is estimated. Any amount paid in excess of this estimate represents goodwill. Intangible assets with a finite life are written off over the expected period of use; those with an indefinite life (primarily goodwill and rights to trademarks and names) are not amortized but are tested annually for impairment. Especially in the determi-nation of the value in use of goodwill and rights to trademarks and names, differences between assumed and actual outcomes could lead to changes in the results of impairment testing. The assumptions concerning the achievable margins and the growth rates have a significant impact on impairment test outcomes. The valuation of goodwill and other intangibles, as well as the esti-mation of useful life, have an effect on the consolidated financial statements.
■ Provisions (see note 16) are, by definition, liabilities of uncertain amount. Future events can thus lead to adjustments that affect income.
■ Deferred tax assets (see note 12) are recognized only if it is likely that taxable profits will be earned in the future. The tax planning is based on estimates and assumptions as to the future profit trajectories of the Group companies that may later prove incorrect. This can lead to changes with an effect on income.
■ Employee benefit plans (see note 17): The Group operates employee benefit plans for its staff that are classified as defined benefit plans under IFRS. These defined benefit plans are valued annually, which requires the use of various assumptions. Differences between the actual outcomes and the assumptions, particularly as to the discount rate for future obligations and as to life expec-tancy, may have effects on the valuation of plan assets and thus on the finan-cial position of the Group. The effect of the most important parameters on the net present value of the obligation is presented in note 17.
02.3 Estimates
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There were no changes in the basis of consolidation from the prior year. The con-solidated financial statements comprise the accounts of the companies listed below.
Company Registered office Equity interest in %
2018 2017
Comet Holding AG Flamatt, Switzerland 100% 100%
Comet AG Flamatt, Switzerland 100% 100%
Comet Electronics (Shanghai) Co. Ltd. Shanghai, China 100% 100%
Comet Mechanical Equipment (Shanghai) Co. Ltd. Shanghai, China 100% 100%
Comet Technologies USA, Inc. Shelton, CT, USA 100% 100%
Comet Technologies Korea Co. Ltd. Suwon, Korea 100% 100%
Yxlon International GmbH Hamburg, Germany 100% 100%
Yxlon International A/S Taastrup, Denmark 100% 100%
Yxlon International KK Yokohama, Japan 100% 100%
Yxlon (Beijing) X-Ray Equipment Trading Co. Ltd. Beijing, China 100% 100%
The consolidated financial statements represent the aggregation of the annual accounts of the individual Group companies, which are prepared using uniform accounting principles. Those companies controlled by Comet Holding AG are fully consolidated. This means that these companies’ assets, liabilities, equity, expens-es and income are entirely included in the consolidated financial statements. All intragroup balances and transactions, unrealized gains and losses resulting from intragroup transactions, and dividends are eliminated in full.
Acquisitions and goodwillCompanies are consolidated from the date on which effective control passes to the Group. Consolidation ends only when effective control ceases. On acquisition, the identifiable assets, liabilities and contingent liabilities are measured at fair val-ue and included in the accounts using the acquisition method. For acquisitions, intangible assets that arise from a contractual or legal right or are separable from the business entity, and whose fair value can be measured reliably, are reported separately. Goodwill, being the excess of the aggregate consideration transferred over the fair value of the net assets of the acquired subsidiary, is initially measured at cost. If the aggregate consideration transferred is lower than the fair value of the acquired net assets, the difference is recognized as negative goodwill in other operating income at the acquisition date. Goodwill and other intangible assets are allocated on acquisition to those companies expected to benefit from the acquisi-tion or to generate future cash flows as a result of it. When Group companies are sold, the difference between their sale price and their net assets, plus accumu-lated currency translation differences, is recognized as operating income in the consolidated statement of income.
02.4 Consolidation
02.4.1 Basis of consolidation
02.4.2 Method of consolidation
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements46
Foreign currency translationThe functional currency of the Group companies is the respective national curren-cy. Transactions in a currency other than the functional currency are translated at the exchange rate prevailing at the transaction date. Financial assets and liabilities are translated at the balance sheet date at the exchange rate as of that date; the resulting currency translation differences are reported in the income statement. The consolidated financial statements are presented in Swiss francs. The financial statements of the Group companies are translated at the average exchange rates for the year (the “average rate” in the table below) for the income statement and at year-end rates (the “closing rate”) for the balance sheet. The resulting currency translation differences are recognized in other comprehensive income. Currency translation differences from intragroup loans for the long-term financing of Group companies are also recognized in other comprehensive income, to the extent that repayment is neither planned nor is likely to occur in the foreseeable future.
The exchange rates used to translate the most important currencies are listed below:
Closing rate Average rate
Country or region Dec. 31, 2018 Dec. 31, 2017 2018 2017
USA USD 1 0.985 0.975 0.978 0.985
Eurozone EUR 1 1.126 1.169 1.155 1.112
China CNY 1 0.143 0.150 0.148 0.146
Japan JPY 100 0.894 0.868 0.886 0.878
Denmark DKK 1 0.151 0.157 0.155 0.149
Republic of Korea KRW 1,000 0.885 0.916 0.889 0.871
Financial assets and liabilitiesFinancial assets are initially measured at fair value (market value), including trans-action costs, except in the case of financial assets categorized as at fair value through profit or loss, for which transaction costs are recorded directly in financ-ing expenses. All purchases and sales of financial assets are recognized at the transaction date.
■ Financial items at fair value through profit or loss: These include all deriva-tives, trading positions, and certain financial assets and liabilities designated as falling into this category. These assets are recognized at fair value in the balance sheet. Changes in value are reported as financing income or expense in the reporting period in which they occur.
■ Financial items at amortized cost: These are measured at cost using the effec-tive interest method.
Fair value is determined based on quoted or other market prices. In the fiscal year as in the prior year, no hedge accounting under IFRS 9 or IAS 39 was applied to any hedging transactions. Financial assets are recognized as soon as Comet acquires control of them, and derecognized when it ceases to have control, i.e., when it has sold the rights or they have lapsed. Financial liabilities are derecognized when the obligation specified in the contract is discharged or is canceled or expires.
Cash and cash equivalentsIn addition to cash on hand and balances in checking accounts at banks, cash and cash equivalents can also include fixed-term deposits with original maturities of up to three months.
02.5 Measurement and recognition policies
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Trade and other receivables and contract assetsTrade receivables, other receivables and contract assets are reported at their face value less any necessary impairment charges. Comet provides for impairment using the simplified approach by recognizing an allowance in the amount of the losses expected over the remaining life of the instruments (known as the expected credit loss model). For specific doubtful arrears with objective indications of im-pairment, impairment charges are applied individually.
Whether a receivable or a contract asset is recognized is governed by whether the right to consideration is unconditional (leading to recognition of a receivable) or conditional (leading to recognition of a contract asset).
InventoriesInventories are recorded at the lower of cost and net realizable value. Net realiz-able value represents the estimated normal sale price less the costs of comple-tion, marketing, selling and distribution. Raw materials and purchased products are measured using the weighted-average method; internally produced goods are measured at target costs. Inventories include proportionate shares of production overheads.
Revenue recognition (sales and other income)Net sales represent the revenue from the sale of products and services to third parties, net of rebates and other price reductions. Revenue is recognized at the time that control of the products and services has passed to the customer, in the amount of the consideration to which Comet is expected to be entitled in exchange for the products or services. Depending on the product and the agreed shipment terms, control is transferred to the customer at the time of shipment (Incoterms) or only at the time of acceptance by the customer. In the case of warranty obligations that provide an additional service to the customer (service-type warranties), the revenue associated with them is recognized over time, based on the passage of time. Revenue from other services such as repair or training is recognized at the time of satisfaction of the performance obligation.
Customer contributions to development projects, including payments for the de-livery of the respective first prototype, are recorded in other operating income; subsequent deliveries of prototypes are reported as sales.
Variable price elements (variable consideration) exist both in retroactive rebates when the quantity of products purchased exceeds a certain threshold in the cal-endar year, and in individual discounts on products. The amount of the rebate is estimated using the most-likely-amount method and as a rule is allocated propor-tionately to all performance obligations under the contract.
No interest effect is recognized for contract liabilities and prepayments by customers, as the period between the time of transfer of a promised good or service to the customer and the time of payment is not more than one year.
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements48
Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulated depreciation and impairment. Borrowing costs related to qualifying assets form part of the historical cost. Depreciation is provided on a straight-line basis over the estimated useful life of the assets. The expense for depreciation of property, plant and equip-ment is recognized in the income statement under that expense category which corresponds to the function of the particular asset in the Group. Land values are not depreciated. Impairment charges are recognized as a separate line item under accumulated depreciation. Maintenance costs are recognized as assets only if the maintenance extends the expected life of the asset, expands production capacity or otherwise increases asset values. The cost of maintenance and repair that do not increase asset values is charged directly to income. The following estimated useful lives are applied in determining depreciation:
Buildings 20 – 40 years
Plant and equipment 6 – 10 years
Other tangible assets 3 – 10 years
Intangible assetsThe intangible assets recognized are goodwill, rights to trademarks and names, customer lists, technology, licenses, patents, and software. Intangible assets are recognized at cost and generally amortized on a straight-line basis over their expected useful life. Goodwill and acquired rights to trademarks and names are not amortized but are tested annually for impairment (see section “Impairment of non-current assets” below). The expense for amortization of intangible assets with finite useful lives is recognized in the income statement under that expense category which corresponds to the function of the particular asset in the Group.
The following estimated useful lives are applied in determining amortization:
Customer lists 10 – 15 years
Technology 5 – 10 years
Computer software 3 – 5 years
ProvisionsProvisions are recognized only where Comet has a present obligation to a third party arising from a past event and the amount of the obligation can be estimated reliably. No provisions are recognized for possible losses that may result from future events.
Provisions are classified as current to the extent that the related cash outflows are expected to occur within one year from the balance sheet date. Conversely, the cash outflows in respect of non-current provisions are expected to occur more than twelve months after the balance sheet date. If the interest effect is material, the cash outflows are discounted.
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements49
Post-employment benefits Comet maintains post-employment benefit plans for its employees which differ according to the local circumstances of the individual Group companies. The ben-efit plans are financed by contributions to benefit arrangements that are separate legal entities (foundations or insurance companies) or by the accumulation of re-serves in the balance sheet of the respective Group company. In the case of de-fined contribution plans or economically equivalent arrangements, the expenses accrued in the reporting period represent the agreed contributions of the Group company. For defined benefit plans, the service costs and the present value of the defined benefit obligation are calculated in actuarial valuations by indepen-dent experts, using the projected unit credit method. The calculations are updated annually. The surplus or deficit recognized in the balance sheet is equal to the present value of the defined benefit obligation as determined by the actuary, less the fair value of plan assets. Any resulting net surplus is recognized as an asset only to the extent of the potential economic benefit that may be realized from this asset in the future, taking into consideration IFRIC 14. The expense charged to in-come is the actuarially determined service cost plus the net interest cost. Actuarial gains and losses are recognized in other comprehensive income. They comprise experience adjustments (the effects of differences between the previous actuarial assumptions and the observed outcomes) and the effects of changes in actuarial assumptions (particularly regarding the discount rate and life expectancy).
Long-term employee benefitsComet grants length-of-service awards to its employees after a certain number of years of service, in the form of lump-sum payments that increase in amount with the number of years of employment. Comet calculates the resulting obligation us-ing the projected unit credit method. The calculation is updated annually. Any ac-tuarial gains or losses from the remeasurement are immediately taken to income.
Share-based paymentsPart of the variable compensation of the members of the Executive Com-mittee under the short-term incentive plan (STIP), and part of the fixed com-pensation of the Board of Directors, is paid in stock. In addition, the Executive Committee is granted stock under a long-term incentive plan (LTIP). The ex-pense is recognized at the value of the stock earned, measured at the quoted market price (fair value) at the grant date. The amount accrued for those com-ponents of compensation which must be equity-settled (i.e., for which there is no option of cash payment) is recognized directly in equity. For compo-nents which the beneficiary can choose to receive in equity or in cash, the val-ue of the option which this choice represents is determined and recognized as an increase in equity, while the rest of the obligation is recorded as a liability.
Income taxThe income tax expense for the reporting period is composed of current taxes and deferred taxes.
Current taxesCurrent tax liabilities and assets for the current period and prior reporting periods are recognized based on the amount expected to be payable to or refunded by the tax authorities. They are calculated based on the tax regulations and tax rates in effect at the balance sheet date.
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements50
Deferred taxesDeferred taxes are accounted for by the liability method. Under this approach, the income tax effects of temporary differences between the tax bases and the values used in the consolidated financial statements are recorded as non-cur-rent liabilities or non-current assets. Deferred taxes are calculated at actual or expected local tax rates. Changes in deferred taxes are included in income tax expense in the income statement, except for deferred taxes in respect of items that are recognized outside profit or loss. These latter deferred taxes are likewise recognized outside profit or loss; according to the underlying accountable event, they are recognized either in other comprehensive income or directly in equity. Deferred tax liabilities are recognized on all taxable temporary differences ex-cept for goodwill. Deferred tax assets are recognized for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carryforward of unused tax credits and unused tax losses can be utilized, except:
■ When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit for the period nor taxable profit or loss.
■ In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future.
LeasesLeases of property, plant and equipment that transfer substantially all risks and rewards of ownership to Group companies are classified as finance leases. For assets acquired under finance leases, the lower of the fair value of the asset and the net present value of future non-cancelable lease payments is recognized as a non-current asset. Assets held under finance leases are depreciated over the shorter of their estimated useful life and the term of the lease. Service contracts (particularly outsourcing agreements) involving direct or indirect provisions on the use of specified assets are reviewed at inception as to whether the arrange-ments contain a lease under IFRS.
Payments under operating leases are recorded as operating expenditure and rec-ognized on a straight-line basis in profit or loss over the periods to which they relate.
Impairment of non-current assetsThe value of property, plant and equipment and other non-current assets, includ-ing intangibles, is reviewed whenever it appears possible, as a result of changed circumstances or events, that the assets’ carrying amount represents an over-valuation. Intangible assets under construction are tested for impairment annu-ally. If the carrying amount exceeds the amount recoverable through use or sale of the asset, the carrying amount is reduced to this recoverable amount and the difference is recorded as an impairment charge in the income statement. The re-coverable amount is the higher of realizable value or value in use. Value in use is determined on the basis of discounted expected future cash flows. Any acquired goodwill and any rights to trademarks or names with an indefinite useful life are not amortized but are reviewed annually at the same date for impairment. This impairment test is based on the results for the fiscal year, the rolling multi-quarter forecast and the rolling multi-year plan.
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements51
In the following tables, sales revenue is analyzed by region and by market sector.
In thousands of CHF Plasma Control
Technologies (PCT)
X-Ray Systems
(IXS)
Industrial X-Ray
Modules (IXM)
ebeam Technologies
(EBT)
Consolidated
2018 2017 1 2018 2017 1 2018 2017 1 2018 2017 1 2018 2017 1
Sales by region
Europe 8,947 7,808 35,661 41,176 29,431 26,396 13,979 18,199 88,018 93,579
USA 165,224 162,290 15,167 19,647 23,526 19,780 3,422 5,900 207,338 207,617
Asia 37,925 42,648 70,981 65,895 13,978 13,274 1,866 5,031
124,751 126,848
Rest of world 101 204 13,501 12,527 1,984 2,279 663 316 16,249 15,326
Total 212,197 212,950 135,310 139,245 68,919 61,729 19,930 29,446
436,356 443,370
1 Restated for IFRS 15 (see note 2.1).
Sales by marketIn thousands of CHF 2018 2017 1
PCT
Semiconductor 187,417 187,579
Flat panel 8,741 6,552
Others 16,039 18,819
Total PCT 212,197 212,950
IXS
Automotive 55,955 63,685
Electronics 40,787 38,203
Science & New materials 17,527 16,922
Aerospace 14,395 16,110
Others 6,646 4,325
Total IXS 135,310 139,245
IXM
Non-destructive testing 47,210 39,260
Security 11,371 14,136
Others 10,338 8,333
Total IXM 68,919 61,729
Total EBT 19,930 29,446
Total net sales 436,356 443,370
1 Restated for IFRS 15 (see note 2.1).
The aggregate amount of the transaction prices allocated to performance obliga-tions that were unsatisfied or partly unsatisfied at December 31, 2018 was CHF 114 million. Comet will realize this revenue as soon as the performance obligations have been fulfilled and the customers have acquired control of the products or ser-vices. It is expected that this will generally be the case in the next 12 to 24 months. Comet is making use of the practical expedient available for the initial application of IFRS 15 regarding the disclosure of remaining performance obligations.
03 Revenue from contracts with customers
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements52
Contract balancesOpening and closing balances of receivables, contract assets and contract liabili-ties from contracts with customers are presented in the balance sheet and in note 5. The contract assets consisted mainly of the rights to consideration for product deliveries and services of the X-Ray Systems division that were completed but not yet billed at the balance sheet date. The contract liabilities consisted of prepay-ments received from customers. The revenue recognized in 2018 from contract liabilities that existed at the beginning of the period amounted to CHF 22.6 million (prior year: CHF 26.8 million).
Material changes in contract balances result from the receipt of customer pay-ments and the invoicing of satisfied performance obligations. The divestiture of the ebeam systems business in Davenport, Iowa, USA, caused a reduction of CHF 5.0 million in contract liabilities. Further details are disclosed in note 21.
The Group is managed on the basis of the following four operating divisions, which are delineated based on their products and services. For financial report-ing purposes the divisions are also referred to here as “operating segments” or “segments”.
■ The Plasma Control Technologies (PCT) division develops, manufactures and markets vacuum capacitors, radio frequency (RF) generators and RF imped-ance matching networks for the high-precision control of plasma processes re-quired, for instance, in the production of memory chips and flat panel displays.
■ The X-Ray Systems (IXS) division develops, manufactures and markets x-ray systems and services for non-destructive examination using x-ray and micro-focus technology and computed tomography.
■ The Industrial X-Ray Modules (IXM) division develops, manufactures and mar-kets highly compact x-ray sources and portable x-ray modules for non-destruc-tive testing, steel metrology and airport security inspection.
■ The ebeam Technologies (EBT) division develops, manufactures and markets compact ebeam sets for the treatment of surfaces in the food and printing in-dustries.
Segment operating income represents all revenues and expenses attributable to a particular division. The only revenues and expenses not allocated to the segments are those of Comet Holding AG, certain government grants, and net financial items and income taxes. These unallocated expenses and revenues are reported in the “corporate” column. Transactions between the segments are invoiced at prices also charged to third parties.
The segment assets and liabilities represent all operating items. The following assets and liabilities are not allocated to operating segments: the assets and liabil-ities of Comet Holding AG, all cash and cash equivalents, all current and non-cur-rent debt and all income tax assets and liabilities. These unallocated assets and liabilities are reported in the “Corporate” column.
04 Segment reporting
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements53
Fiscal year 2018In thousands of CHF Plasma
Control Technologies
(PCT)
X-Ray Systems
(IXS)
Industrial X-Ray
Modules (IXM)
ebeam Technologies
(EBT)
Elimination of interseg-ment sales
Corporate Consolidated
Net sales
External net sales 212,197 135,310 68,919 19,930 – – 436,356
Intersegment sales – 359 12,276 63 (12,698) – –
Total net sales 212,197 135,669 81,195 19,993 (12,698) – 436,356
Earnings
Segment operating income 38,162 (5,714) 16,073 (28,249) 278 – 20,549
Unallocated costs – – – – – (2,587) (2,587)
Operating income 38,162 (5,714) 16,073 (28,249) 278 (2,587) 17,962
Financing expenses (9,387)
Financing income 6,562
Income before tax 15,137
Income tax (2,858)
Net income 12,279
EBITDA 41,806 (1,510) 20,039 (20,233) 278 (2,587) 37,793
EBITDA in % of sales 19.7% – 1.1% 24.7% – 101.2% 8.7%
Assets and liabilities at Dec. 31, 2018
Segment assets 104,586 102,327 89,125 18,535 – 53,186 367,759
Segment liabilities (24,464) (48,793) (19,102) (4,961) – (70,400) (167,721)
Net assets 80,122 53,534 70,023 13,574 – (17,215) 200,038
Other segment information
Capital expenditure 12,372 1,525 13,632 3,125 – – 30,653
Depreciation and amortization 3,644 4,204 3,967 8,016 – – 19,831
Change in provisions 906 2,902 (318) (1,228) – – 2,262
Other non-cash expense/(income) 315 (69) 1,150 508 43 1,177 3,125
Number of employees at year end 535 420 314 77 – – 1,346
04.1 Operating segments
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements54
Fiscal year 2017 1
In thousands of CHF Plasma Control
Technologies (PCT)
X-Ray Systems
(IXS)
Industrial X-Ray
Modules (IXM)
ebeam Technologies
(EBT)
Elimination of interseg-ment sales
Corporate Consolidated
Net sales
External net sales 212,950 139,245 61,729 29,446 – – 443,370
Intersegment sales – 548 17,080 33 (17,661) – –
Total net sales 212,950 139,793 78,809 29,479 (17,661) – 443,370
Earnings
Segment operating income 52,541 4,615 14,401 (18,411) (743) – 52,403
Unallocated costs – – – – – (1,666) (1,666)
Operating income 52,541 4,615 14,401 (18,411) (743) (1,666) 50,737
Financing expenses (6,971)
Financing income 6,086
Income before tax 49,852
Income tax (14,516)
Net income 35,336
EBITDA 55,676 8,179 17,963 (16,206) (743) (1,666) 63,203
EBITDA in % of sales 26.1% 5.9% 22.8% – 55.0% 14.3%
Assets and liabilities at Dec. 31, 2017
Segment assets 114,755 98,139 69,141 36,587 – 71,167 389,789
Segment liabilities (31,788) (48,731) (20,614) (13,682) – (73,426) (188,241)
Net assets 82,967 49,408 48,527 22,905 – (2,259) 201,548
Other segment information
Capital expenditure 20,803 3,968 12,472 4,264 – – 41,507
Depreciation and amortization 3,135 3,563 3,563 2,205 – – 12,466
Change in provisions 2,221 (645) (185) 940 – (118) 2,213
Other non-cash expense/(income) 997 192 1,522 564 (85) (653) 2,537
Number of employees at year end 549 433 302 151 – – 1,435
1 Restated for IFRS 15 (see note 2.1).
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements55
Reconciliation of aggregate segment assets and liabilities to consolidated results
In thousands of CHF 2018 2017 1
Operating segments' assets 314,573 318,621
Total cash and cash equivalents 43,007 60,420
Derivatives used for foreign exchange hedging 26 277
Tax receivables 2,893 2,660
Deferred tax assets 7,063 7,536
Comet Holding AG's receivables from third parties 196 275
Total assets 367,759 389,789
Operating segments' liabilities (97,321) (114,814)
Current and non-current debt (67,812) (67,865)
Derivatives used for foreign exchange hedging (379) (2)
Tax payables (870) (3,131)
Deferred tax liabilities – (1,137)
Comet Holding AG's payables to third parties (1,339) (1,292)
Total liabilities (167,721) (188,241)
1 Restated for IFRS 15 (see note 2.1).
Comet markets its products and services throughout the world and has its own companies in Switzerland, Germany, Denmark, the USA, China, Japan and South Korea. Net sales are allocated to countries on the basis of customer location.
Net sales by regionIn thousands of CHF 2018 2017 1
Switzerland 3,208 2,788
Germany 36,726 34,227
Rest of Europe 48,084 56,564
Total Europe 88,018 93,579
Total USA 207,338 207,617
China 57,749 64,080
Japan 22,365 23,814
Rest of Asia 44,637 38,954
Total Asia 124,751 126,848
Rest of world 16,249 15,326
Total 436,356 443,370
1 Restated for IFRS 15 (see note 2.1).
Property, plant, and equipment and intangible assets by regionIn thousands of CHF 2018 2017
Switzerland 114,978 94,950
Germany 31,733 36,220
USA 5,423 13,178
Rest of world 2,284 2,355
Total 154,418 146,703
04.2 Geographic information
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements56
In the year under review, the Plasma Control Technologies division recorded sales of CHF 115 million with its largest customer, which represented 26.4% of Group sales (prior year: CHF 120 million and 27.3%).
In thousands of CHF 2018 2017 1
Trade receivables, gross 53,996 57,021
Impairment of trade receivables (614) (1,104)
Trade receivables, net 53,382 55,917
Refundable sales taxes and value-added taxes 2,648 3,785
Prepayments to suppliers 5,552 3,375
Contract assets 887 –
Sundry receivables 1,474 1,497
Total other receivables 10,561 8,657
Total trade and other receivables 63,943 64,574
1 Restated for IFRS 15 (see note 2.1).
At January 1, 2017, the beginning of the prior year, net trade receivables were CHF 43.3 million; there were no contract assets. The divestiture of the ebeam systems business in Davenport had a negative effect of CHF 1.1 million on trade receivables. Further details are disclosed in note 21.
The allowance account for impairment of trade receivables showed the following movement:
In thousands of CHF 2018 2017
January 1 1,104 1,018
Added 95 230
Released (562) (180)
Foreign currency translation differences (23) 36
December 31 614 1,104
At the balance sheet date, complete impairment was recognized on CHF 0.5 million (prior year: CHF 0.5 million) of trade receivables. Within the item “other receiv-ables” and within contract assets, there were no amounts past due or written down. The Group does not hold security against trade and other receivables.
04.3 Sales with key accounts
05 Trade and other receivables
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements57
The aging schedule for past-due trade receivables on which impairment has been recognized is summarized in the table below.
In thousands of CHF Expected loss rate Gross carrying amount
Dec. 31, 2018
Expected credit loss
Dec. 31, 2018
Net carrying amount
Dec. 31, 2018
Net carrying amount
Dec. 31, 2017 1
Trade receivables 53,996 614 53,382 55,917
Not past due 0.1% 46,892 68 46,824 50,390
Over 30 days past due, impairment recognized 0.3% 5,004 16 4,988 2,424
Over 60 days past due, impairment recognized 0.5% 575 3 572 1,304
Over 90 days past due, impairment recognized 1.1% 409 4 405 505
Over 120 days past due, impairment recognized 1.5% 212 3 209 251
Over 150 days past due, impairment recognized 57.4% 2 905 519 386 1,043
1 Restated for IFRS 15 (see note 2.1).2 Includes individual impairment allowances.
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements58
In thousands of CHF 2018 2017
Other financial assets at fair value through profit or loss
Derivatives used for foreign exchange hedging 26 277
Total other financial assets at fair value through profit or loss 26 277
Other financial assets at amortized cost
Other non-current financial assets 209 239
Total other financial assets at amortized cost 209 239
Total other financial assets 235 516
Total current 26 277
Total non-current 209 239
In thousands of CHF 2018 2017
Other financial liabilities at fair value through profit or loss
Derivatives used for foreign exchange hedging 379 2
Total other financial liabilities at fair value through profit or loss 379 2
At the balance sheet date, open positions in forward exchange contracts were as follows:
In thousands of CHF 2018 2017
USD forward exchange contracts
Contract amounts 21,763 17,860
Positive fair values 26 228
Negative fair values 284 2
JPY forward exchange contracts
Contract amounts 2,197 2,549
Positive fair values – 49
Negative fair values 79 –
CNY forward exchange contracts
Contract amounts 858 –
Positive fair values – –
Negative fair values 16 –
The gains and losses from foreign exchange contracts are recognized as financ-ing income or expense (see note 26). The contract amounts shown represent the notional principal amounts of the forward contracts. Consistent with the nature of the Group’s activities, the forward exchange contracts have maturities of less than one year; most are due within six months.
06 Other financial assets and liabilities
06.1 Other financial assets
06.2 Other financial liabilities
06.3 Derivative financial instruments
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements59
In thousands of CHF 2018 2017 1
Raw materials and semi-finished products 45,495 42,242
Work in process 14,470 21,023
Finished goods 31,125 39,560
Total inventories 91,090 102,825
1 Restated for IFRS 15 (see note 2.1).
The inventory amounts reflect any necessary individual write-downs for items with a market value below manufacturing cost. The expense recognized for inven-tory write-downs was CHF 5.5 million (prior year: CHF 5.3 million).
The divestiture of the ebeam systems business in Davenport caused a reduction of CHF 10.5 million in inventories. Further details are disclosed in note 21.
In thousands of CHF 2018 2017 1
Contract costs 1,629 1,145
Other prepaid expenses 3,480 3,410
Total prepaid expenses 5,109 4,555
1 Restated for IFRS 15 (see note 2.1).
The contract costs represent capitalized sales commissions for agent activities (incremental costs directly attributable to obtaining a contract). In the fiscal year, sales commissions of CHF 3.6 million were recognized in the income statement (prior year: CHF 4.0 million).
The other prepaid expenses consisted largely of prepayments made for the subsequent fiscal year.
07 Inventories
08 Prepaid expenses
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements60
Fiscal year 2018In thousands of CHF Real estate Plant and
equipmentOther tangible
assetsAssets under construction
Total property, plant and
equipment
Cost
January 1, 2018 51,637 76,928 18,909 41,200 188,674
Additions 8,431 11,368 1,084 7,837 28,720
Commissioning of assets under construction 36,872 2,527 1,004 (40,403) –
Disposals – (5,076) (1,495) – (6,571)
Foreign currency translation differences (21) (256) (227) 3 (501)
December 31, 2018 96,919 85,491 19,275 8,637 210,322
Accumulated depreciation
January 1, 2018 24,998 57,020 11,601 – 93,618
Additions 1,243 4,856 2,411 – 8,510
Impairments – 535 131 – 666
Disposals – (4,567) (1,140) – (5,707)
Foreign currency translation differences (11) (172) (174) – (357)
December 31, 2018 26,230 57,672 12,829 – 96,731
Carrying amount
January 1, 2018 26,639 19,908 7,309 41,200 95,056
December 31, 2018 70,689 27,819 6,446 8,637 113,591
The disposals of other tangible assets included the reclassification of CHF 0.5 mil-lion (prior year: CHF 0.2 million) of internally produced demonstration equipment to inventories, which did not result in an outflow of funds. There were no leased assets (under finance leases) within property, plant and equipment (prior year: CHF 0.2 million).
The assets under construction related largely to improvements of (i.e., finish-ing-work on) the building expansion in Flamatt. For the building expansion, com-pleted at the end of 2018, and for the improvements to it, interest of CHF 0.6 million was capitalized (prior year: CHF 0.4 million). The interest rate used is the effective interest rate of the bond (see note 13).
The divestiture of the ebeam systems business in Davenport resulted in an im-pairment charge of CHF 0.7 million and reductions in cost and accumulated de-preciation of CHF 1.4 million for plant and equipment and of CHF 0.4 million for other tangible assets. At the time of the disposal, all items of property, plant and equipment had already been fully written off. Further details on the Davenport divestiture are given in notes 11.1 and 21.
09 Property, plant and equipment
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements61
Fiscal year 2017In thousands of CHF Real estate Plant and
equipmentOther tangible
assetsAssets under construction
Total property, plant and
equipment
Cost
January 1, 2017 51,589 71,307 15,790 14,077 152,763
Additions – 4,233 2,805 30,516 37,554
Commissioning of assets under construction – 1,631 1,816 (3,447) –
Disposals – (448) (1,806) – (2,254)
Foreign currency translation differences 48 205 304 54 611
December 31, 2017 51,637 76,928 18,909 41,200 188,674
Accumulated depreciation
January 1, 2017 23,425 52,785 9,650 – 85,861
Additions 1,549 4,407 2,118 – 8,074
Disposals – (316) (437) – (753)
Foreign currency translation differences 24 144 270 – 437
December 31, 2017 24,998 57,020 11,601 – 93,618
Carrying amount
January 1, 2017 28,164 18,521 6,140 14,077 66,902
December 31, 2017 26,639 19,908 7,309 41,200 95,056
Assets pledged or assigned as collateral for Group obligations (encumbered assets)At December 31, 2018, all real estate liens (mortgage notes in the amount of CHF 30.0 million) were held within the Group. In the prior year, the carrying amount of pledged real estate was CHF 63.2 million, of which CHF 24.0 million was pledged as collateral for Group obligations for CHF 8.0 million of loan amounts drawn.
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements62
Fiscal year 2018In thousands of CHF Goodwill and
trademarksCustomer
listsTechnology Software Other
intangible assets
Total intangible
assets
Cost
January 1, 2018 29,229 28,825 4,753 22,174 224 85,205
Additions – – 401 1,291 241 1,933
Disposals – (7,529) (2,654) (1,612) (188) (11,983)
Foreign currency translation differences (817) (380) (68) (239) (1) (1,505)
December 31, 2018 28,412 20,916 2,432 21,614 276 73,650
Accumulated amortization
January 1, 2018 0 19,199 2,041 12,253 65 33,558
Additions – 1,470 367 3,413 5 5,255
Impairments – 3,433 1,814 153 5,400
Disposals – (7,529) (2,654) (562) (188) (10,933)
Foreign currency translation differences – (295) (52) (110) (0) (457)
December 31, 2018 0 16,278 1,516 14,994 35 32,823
Carrying amount
January 1, 2018 29,229 9,626 2,712 9,921 159 51,647
December 31, 2018 28,412 4,638 916 6,620 241 40,827
The divestiture of the ebeam systems business in Davenport resulted in an impair-ment charge of CHF 5.4 million and reductions in cost and accumulated amorti-zation of CHF 4.4 million for customer lists and of CHF 2.7 million for technology. Further details on the Davenport divestiture are given in notes 11.1 and 21.
Fiscal year 2017In thousands of CHF Goodwill and
trademarksCustomer
listsTechnology Software Other
intangible assets
Total intangible
assets
Cost
January 1, 2017 27,374 27,863 4,694 17,686 230 77,847
Additions – – – 3,953 – 3,953
Foreign currency translation differences 1,855 962 59 535 (6) 3,405
December 31, 2017 29,229 28,825 4,753 22,174 224 85,205
Accumulated amortization
January 1, 2017 0 16,809 1,492 9,794 50 28,144
Additions – 1,584 468 1,896 14 3,962
Impairments – – – 429 – 429
Foreign currency translation differences – 806 81 134 1 1,022
December 31, 2017 0 19,199 2,041 12,253 65 33,558
Carrying amount
January 1, 2017 27,374 11,054 3,203 7,892 180 49,703
December 31, 2017 29,229 9,626 2,712 9,921 159 51,647
10 Intangible assets
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements63
The categories “goodwill and trademarks”, “customer lists” and “technology” were capitalized in connection with business combinations. The residual useful lives of the customer lists ranged up to six years.
Under a long-term brand strategy, the established Yxlon name is used alongside the Comet brand. The Group therefore deems the capitalized Yxlon brand to have an indefinite useful life.
The impairment test for goodwill and other intangible assets with indefinite useful lives was performed as at September 30, 2018. For the purpose of the impairment test, the assets to be tested were allocated to and measured as the following two cash generating units, at the level of the IXS division and (within the IXM division) at the level of the IXT business unit:
■ X-Ray Systems (IXS), as the relevant cash generating unit for all activities of the acquired Yxlon group and for the FeinFocus product group, with the excep-tion of the generator business.
■ Industrial X-Ray Technology (IXT), for the generator business acquired as part of the acquisition of Yxlon.
The impairment test is based on the value in use method. The recoverable amount is determined from the present value of the future cash flows (DCF valuation). The calculations are based on the Board-approved rolling forecast current at the time of the impairment test, and on the Board-approved rolling medium-term plan for 2019 to 2021. Using experience-based estimates, the amounts in the forecast and in the medium-term plan are based on growth projections for net sales, operat-ing income and other parameters, taking into consideration the estimated market trends in the various regions. Cash flows beyond the forecast period are extrap-olated using an assumed growth rate of 1.5% to 1.8%, which is within the expect-ed rate of market growth. The assumptions applied in determining value in use correspond to the expected long-term average growth rate of the X-Ray Systems division’s operating business and of the generator business of Industrial X-Ray Modules. Input variables with a critical impact on the outcome of the impairment test are the assumed rates of sales growth and the projected trend in operating income.
Carrying amount of the assets testedX-Ray Systems (IXS) CGU Industrial X-Ray
Technology (IXT) CGUTotal
In thousands of CHF 2018 2017 2018 2017 2018 2017
Goodwill 19,287 20,018 6,873 6,873 26,160 26,891
Trademarks (Yxlon) 2,253 2,338 0 0 2,253 2,338
Total carrying amount 21,540 22,356 6,873 6,873 28,412 29,229
Assumptions applied in the valuation modelX-Ray Systems (IXS) CGU Industrial X-Ray
Technology (IXT) CGU
2018 2017 2018 2017
Discount rate (WACC) before tax 12.2% 11.4% 12.8% 12.8%
Growth rate of terminal value 1.8% 1.5% 1.5% 1.5%
11 Impairment test of goodwill and intangible assets with indefinite useful lives
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements64
Sensitivities to the assumptions applied in the valuation model
The measurement of the values in use of the X-Ray Systems CGU (IXS) and the Industrial X-Ray Technology CGU (IXT) is sensitive to the following assumptions in the planning period (2019 to 2021):
■ Growth assumptions: Sales revenue is projected by product group and region. Based on the stable situation of 2018 as the starting point, the average annual rate of sales growth is assumed to be 6% for IXS (prior year: 5%) and 9% for IXT (prior year: 6%).
■ Gross margins: It is expected that with rising sales, gross margins in the medi-um term will average approximately 38% for IXS (prior year: 44%) and 50% for IXT (prior year: 42%). Target achievement also depends in part on the trend in the purchasing prices of materials.
■ Foreign exchange rates: The movement in exchange rates between the Swiss franc and the euro and US dollar has an effect on company value. The fore-casts are based on September 2018 exchange rates.
■ Discount rate (WACC): The capital costs were determined based on borrowing costs (before tax) as well as the long-term risk-free rate, a small-cap premium, and a market risk premium weighted by a Comet-specific beta factor.
Comet believes that, with a realistic change in the material assumptions, the recoverable amount would not fall below the carrying amount.
For the ebeam systems business (EBS, part of the EBT division), at the end of the first half of 2018 there were indications of asset impairment due to lower profitabil-ity projections, and an impairment test was therefore performed at June 30, 2018.
The impairment test showed the need for an impairment charge on the assets of the EBS CGU. The impairment test is based on the value in use method. The recoverable amount was determined from the present value of the future cash flows (DCF valuation), using a pre-tax discount rate (WACC) of 11.8%. The calcula-tions were based on the Board-approved rolling forecast current at the time of the impairment test, and on the Board-approved rolling medium-term plan for 2019 to 2021. The impairment expense of CHF 6.1 million represents the write-down of certain property, plant and equipment and intangible assets in the EBS business to their recoverable amount. The expense is disclosed in the statement of income under cost of sales (CHF 2.2 million), development expenses (CHF 0.2 million) and marketing and selling expenses (CHF 3.7 million).
Comet divested the ebeam systems business at November 12, 2018, which gave rise to additional losses. Further detail is provided in note 21.
11.1 Impairment in EBS business
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements65
In thousands of CHF 2018 2017 1
Current income tax expense in respect of the current year 3,219 13,522
Current income tax expense in respect of prior years 194 401
Deferred income tax (credit)/expense (555) 593
Total income tax expense 2,858 14,516
1 Restated for IFRS 15 (see note 2.1).
In thousands of CHF 2018 2017 1
Income before tax 15,137 49,852
Expected income tax at base tax rate of 24% (prior year: 28%) 3,633 13,959
Effect of tax rates other than base tax rate 52 168
Effect of tax relief from canton of Fribourg (520) (1,568)
Effect of non-tax-deductible expenses 423 661
Effect of change in tax rate on deferred income tax (29) 1,348
Recognition and offset of tax loss carry-forwards not recognized in prior years (675) –
Effect of non-recognition of tax loss carryforwards – 208
Effect of credits for R&D and domestic manufacturing – (846)
Effect of income tax from other periods (194) 401
Effect of non-refundable withholding tax 193 111
Other effects (24) 74
Income tax reported in the income statement 2,858 14,516
Effective income tax rate in % of income before tax 18.9% 29.1%
1 Restated for IFRS 15 (see note 2.1).
The Tax Cuts and Jobs Act for tax reform passed in the United States in December 2017 resulted in a reduction in Comet's expected corporate tax rate from 28% in 2017 to 24% in 2018.
Comet AG, based in Flamatt, has been granted conditional tax relief by the canton of Fribourg in the form of a reduction in cantonal and municipal taxes for the period to 2022. For 2018 the tax reduction amounted to 50% (prior year: 50%).
12 Income tax
12.1 Current and deferred income tax expense
12.2 Reconciliation of tax expense
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements66
Deferred tax assets and liabilities can be analyzed as follows:
2018 2017 1
In thousands of CHF Assets Liabilities Assets Liabilities
Financial instruments 39 6 35 78
Receivables 979 133 4,392 248
Inventories 3,832 1,064 5,223 3,305
Property, plant and equipment 279 628 303 715
Intangible assets 1 3,274 – 4,076
Trade and other payables 418 184 1,375 7
Accrued expenses 429 52 961 3
Provisions 1,020 1 920 2
Employee benefit plan liabilities 1,364 – 940 –
Tax loss carryforwards, and tax credits for R&D and domestic manufacturing 4,046 684
Total gross deferred tax of Group companies 12,406 5,343 14,833 8,434
Netting of deferred tax by Group companies (5,343) (5,343) (7,297) (7,297)
Amounts in the consolidated balance sheet 7,063 – 7,536 1,137
1 Restated for IFRS 15 (see note 2.1).
The deferred tax assets and liabilities were measured at local tax rates, ranging from 14% to 35%. No deferred tax liabilities were established for temporary differences of CHF 75.6 million (prior year: CHF 90.9 million) in respect of the value of the ownership interests in Group companies. Distributions of retained earnings by subsidiaries are not expected to have an effect on income taxes, except for future distributions from China. There were no tax provisions for non-refundable withholding taxes on future distributions of foreign subsidiaries to Comet Holding AG. Distributions by Comet Holding AG to its shareholders have no effect on the reported or future income taxes.
In thousands of CHF 2018 2017 1
Net asset at January 1 6,399 7,177
Origination and reversal of temporary differences recognized in the income statement (2,808) (593)
Recognition of deferred tax assets on loss carryforwards 3,772 –
Use of tax loss carryforwards (408) –
Deferred tax credit in the income statement 555 (593)
Origination and reversal of temporary differences recognized in other comprehensive income 132 (2)
Foreign currency translation differences (23) (183)
Net asset at December 31 7,063 6,399
1 Restated for IFRS 15 (see note 2.1).
12.3 Deferred tax assets and liabilities
12.4 Movement in deferred tax assets and liabilities
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements67
Deferred tax assets, including tax loss carryforwards and expected tax credits, are recognized only if it is likely that future taxable profits will be available to which these deferred tax assets can be applied. Temporary differences (between the car-rying amounts in the IFRS financial statements and the corresponding tax base) for which no tax assets were recognized were nil (prior year: nil).
At the balance sheet date of December 31, 2018, tax loss carryforwards stood at CHF 13.0 million (prior year: nil). Including tax credits for R&D and domestic manufacturing, the resulting deferred tax assets were CHF 4.0 million (prior year: CHF 0.7 million). The existing loss carryforwards can be carried forward indefinitely.
In the year under review there were no unrecognized deferred tax assets from tax loss carryforwards (prior year: loss carryforwards of CHF 3.3 million with a poten-tial tax effect of CHF 0.7 million).
On April 20, 2016 a five-year, CHF 60 million bond was issued. The bond has a cou-pon rate of 1.875% and is listed on the SIX Swiss Exchange (ticker symbol COT16; security number 32 061 943). Its effective interest rate is 2%.
At the end of the fiscal year under review the Comet Group had undrawn credit facilities of CHF 45.6 million (prior year: CHF 41.2 million).
The non-current debt consisted of the five-year bond maturing in 2021 and of bank loans. In the year under review, all interest and principal payments were made as contractually agreed.
In thousands of CHF 2018 2017
Repayment due in two to five years 63,000 66,000
Repayment due in more than five years – –
Subtotal 63,000 66,000
Future amortization of costs (188) (267)
Total non-current debt 62,812 65,733
All non-current debt represented fixed-rate debt instruments denominated in CHF and having fixed maturities. Loans with original maturities of more than twelve months coming due in the subsequent year were reclassified to current debt.
12.5 Tax loss carryforwards
13 Current and non-current debt
13.1 Non-current debt
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements68
At December 31, 2018, there were no liabilities under finance leases (prior year: CHF 0.1 million).
Fiscal year 2018In thousands of CHF Jan. 1, 2018 Cash flows Reclassif.
from non-current
to current
Unwinding of discount, and
remeasure-ment
Foreign currency
translation differences
Dec. 31, 2018
Current interest-bearing loans and borrowings (excluding items listed below) 2,000 – 3,000 – – 5,000
Current obligations under finance leases 132 (136) – 4 – –
Non-current interest-bearing loans and borrowings (excluding items listed below) 65,733 – (3,000) 79 0 62,812
Total liabilities from financing activities 67,864 (136) – 83 0 67,812
Fiscal year 2017In thousands of CHF Jan. 1, 2017 Cash flows Reclassif.
from non-current
to current
Unwinding of discount, and
remeasure-ment
Foreign currency
translation differences
Dec. 31, 2017
Current interest-bearing loans and borrowings (excluding items listed below) 2,500 (2,500) 2,000 – – 2,000
Current obligations under finance leases 166 (156) 105 15 2 132
Non-current interest-bearing loans and borrowings (excluding items listed below) 67,655 – (2,000) 78 0 65,733
Non-current obligations under finance leases and hire purchase contracts 105 – (105) – – –
Total liabilities from financing activities 70,426 (2,656) – 93 2 67,864
In thousands of CHF 2018 2017 1
Trade payables 23,971 32,089
Sundry payables 4,406 4,933
Sales commissions 4,614 4,674
Total financial liabilities 32,991 41,696
Sales tax and value-added tax 1,928 849
Total other payables 1,928 849
Total trade and other payables 34,919 42,545
1 Restated for IFRS 15 (see note 2.1).
The divestiture of the ebeam systems business in Davenport had the effect of a CHF 0.2 million reduction in trade payables. Further details are disclosed in note 21.
13.2 Finance lease obligations
13.3 Movement in current and non-current debt
14 Trade and other payables
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements69
In thousands of CHF 2018 2017
Accrued staff costs 6,602 14,764
Other accrued expenses 13,715 10,994
Total accrued expenses 20,316 25,758
Accrued staff costs consist mainly of the amount accrued for performance-based compensation, and employees’ vacation and overtime credits. The item “other accrued expenses” relates to outstanding invoices and payables of the fiscal year, such as for rent, energy and consulting.
Fiscal year 2018In thousands of CHF Warranties Other provisions Total provisions
January 1, 2018 7,814 2,380 10,194
Added 5,408 3,067 8,475
Used (3,222) (892) (4,114)
Released (2,308) (10) (2,318)
Foreign currency translation differences (46) (64) (110)
December 31, 2018 7,646 4,481 12,127
Of which:
January 1, 2018
Current provisions 7,814 2,326 10,140
Non-current provisions – 54 54
December 31, 2018
Current provisions 7,646 4,434 12,080
Non-current provisions – 47 47
The provision for warranties covers the risk of expenses for defects that have not occurred to date, but could potentially occur until the end of the warranty periods. Warranty provisions are measured based on historical experience. The divesti-ture of the ebeam systems business in Davenport had the effect of a reduction of CHF 0.2 million in warranty provisions. Further details are disclosed in note 21.
In the prior year, in an internal review of compliance with export regulations, a procedural error was found in the USA in connection with a transfer license. Com-et informed the appropriate authorities of the error and initiated the necessary corrective measures. For the related expenses estimated to be incurred, CHF 1.1 million (prior year: CHF 1.5 million) is held in the item “other provisions”.
The additions to other provisions in the fiscal year related largely to the reorganization of the IXS division.
15 Accrued expenses
16 Provisions
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements70
The Comet Group maintains defined benefit pension plans in Switzerland and Germany. These plans differ according to their particular purpose (retirement, disability, and/or survivor benefits) and are based on the legal requirements in the respective countries.
SwitzerlandThe defined benefit plans are managed within a multi-employer pension fund. This is a separate legal entity falling under the Swiss Federal Act on Occupation-al Retirement, Survivors’ and Disability Pensions (the BVG). The pension fund maintains a main (“base”) plan for employees that provides the legally required benefits, and a supplemental plan that provides benefits in respect of pay com-ponents above the statutory range. The base plan was switched to a fully insured pension model effective January 1, 2018, as is the supplemental plan with effect from January 1, 2019. Both plans are administered by the multi-employer pension fund, which is in the form of a foundation organized by an insurance company. The pension fund is managed by the foundation's board of directors, which is composed of equal numbers of employee and employer representatives and is re-quired to act in the interests of the plan participants. As the base plan is managed under a fully insured model, all investment risk is carried by the pension fund, or ultimately by the insurer. For the supplemental plan, the investment strategy was determined by the administration committee until the change-over to the fully insured model.
Plan participants are insured against the financial consequences of old age, dis-ability and death. The benefits are specified in a set of regulations. Minimum lev-els of benefits are prescribed by law. Contribution levels are set as a percentage of the insured portion of employees’ pay. The retirement benefit is calculated as the retirement pension asset existing at the time of retirement, multiplied by the con-version rate specified in the regulations. Plan participants can opt to receive their principal as a lump sum instead of drawing a pension. The supplemental plan as a rule pays out a lump sum, but a pension can be drawn on request. The amounts of the disability and survivor pensions are defined as a percentage of insured pay.
GermanyIn Germany there is a closed plan with pension commitments which no longer has active participants. The obligations in respect of current pension payments and deferred pensions are recognized in the balance sheet.
Principal actuarial assumptionsSwitzerland Germany
2018 2017 2018 2017
Discount rate at January 1 0.6% 0.6% 1.5% 1.5%
Discount rate at December 31 0.7% 0.6% 1.6% 1.5%
Expected rate of salary increases 1.0% 1.0% – –
Life tables used as basis for life expectancies BVG 2015 GT BVG 2015 GTHeubeck 2018 GT
Heubeck 2005 GT
17 Employee benefits
17.1 Defined benefit plans
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements71
Movement in present value of defined benefit obligation, in plan assets and in net carrying amount for defined benefit plans
Fiscal year 2018In thousands of CHF Present value of
defined benefit obligation
Fair value of plan assets
Net carrying amount
recognized in balance sheet
January 1 (82,536) 75,428 (7,108)
Current service cost (3,636) – (3,636)
Past service cost 613 – 613
Administration cost, excl. cost of managing plan assets (41) – (41)
Current service cost (3,064) – (3,064)
Interest (expense)/income (517) 461 (57)
Defined benefit cost recognized in the income statement (3,581) 461 (3,120)
Return on plan assets, excluding interest income – (290) (290)
Actuarial loss arising from changes in financial assumptions 731 – 731
Actuarial gain arising from changes in demographic assumptions 1,053 – 1,053
Actuarial loss arising from experience adjustments (2,407) – (2,407)
Defined benefit cost recognized in other comprehensive income (623) (290) (913)
Benefits paid-in/deposited 4,387 (4,364) 23
Employee contributions (2,173) 2,173 –
Employer contributions – 1,152 1,152
Foreign currency translation differences 74 (47) 28
December 31 (84,452) 74,513 (9,939)
Reported as an asset –
Reported as a liability (9,939)
The average duration of the defined benefit obligation was 11.6 years.
For the defined benefit plans in Switzerland, the board of directors of the pension fund (a foundation) has decided to reduce the pension conversion rates from the year 2021. This plan amendment leads to a negative past service cost (i.e., it re-sults in income) and a corresponding reduction in the defined benefit obligation. The positive pre-tax effect of CHF 0.6 million is distributed across the 2018 operat-ing income of the divisions as follows: PCT, CHF 0.2 million; IXM, CHF 0.3 million;EBT, CHF 0.1 million.
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements72
Fiscal year 2017In thousands of CHF Present value of
defined benefit obligation
Fair value of plan assets
Net carrying amount
recognized in balance sheet
January 1 (66,286) 61,932 (4,354)
Current service cost (2,698) – (2,698)
Past service cost (2,543) – (2,543)
Administration cost excl. cost of managing plan assets (32) – (32)
Current service cost (5,273) – (5,273)
Interest (expense)/income (440) 406 (33)
Defined benefit cost recognized in the income statement (5,713) 406 (5,306)
Return on plan assets, excluding interest income – 5,182 5,182
Actuarial loss arising from experience adjustments (5,199) – (5,199)
Defined benefit cost recognized in other comprehensive income (5,199) 5,182 (17)
Benefits paid-in/deposited (3,217) 3,251 34
Employee contributions (1,948) 1,948 –
Employer contributions – 2,601 2,601
Foreign currency translation differences (174) 108 (65)
December 31 (82,536) 75,428 (7,108)
Reported as an asset –
Reported as a liability (7,108)
The past service cost recognized in 2017 arose from the decision to switch the defined benefit plans in Switzerland to a fully insured pension model. This switch resulted in changes in benefits; as well, revaluation reserves no longer required were distributed among the retirement accounts of the insured individuals.
The negative pre-tax effect of CHF 2.5 million was distributed among the divi-sions as follows in their 2017 operating income: PCT: CHF 0.9 million; IXM: CHF 1.2 million; EBT: CHF 0.4 million.
Key figures by countrySwitzerland Germany
In thousands of CHF 2018 2017 2018 2017
Present value of defined benefit obligation (82,505) (80,466) (1,947) (2,070)
Fair value of plan assets 73,297 74,130 1,216 1,298
Net carrying amount recognized in the balance sheet (9,207) (6,337) (732) (772)
Defined benefit cost recognized in the income statement (3,109) (5,295) (11) (11)
Defined benefit cost recognized in other comprehensive income (913) (38) 0 21
The employer contributions to the plans in Switzerland for fiscal year 2019 are expected to amount to CHF 2.9 million.
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements73
Major categories of plan assetsIn thousands of CHF 2018 2017
Cash and cash equivalents 13,629 2,320
Equity instruments – 19,447
Debt instruments – 39,914
Real estate – 12,449
Total plan assets at fair value (quoted market price) 13,629 74,130
Assets from insurance contract 60,884 1,298
Total assets without a quoted market price 60,884 1,298
Total plan assets 74,513 75,428
For the base plan, which is managed under a fully insured model, all investment risk is carried by the pension fund, or ultimately by the insurer. The plan assets are therefore reported as "assets under an insurance contract". In the supplemen-tal plan in 2018, Comet did not invest the plan assets directly but only through investment funds offered by insurance companies or banks. These investment products could contain equity securities or debt instruments of Comet Holding AG; however, Comet has no influence of any kind on the investment decisions of the fund managers. At December 31, 2018, the plan assets were held in cash and cash equivalents, in preparation for the change-over of the supplemental plan to a fully insured model with effect from January 1, 2019.
Companies of the Comet Group do not make loans to the pension plans and do not utilize any real estate held by the plans.
SensitivitiesThe following table presents an analysis of how the reported present value of the defined benefit obligation would change in response to hypothetical changes in the actuarial assumptions.
Sensitivity of present value of defined benefit obligation to different scenarios
Switzerland Germany
In thousands of CHF 2018 2017 2018 2017
Discount rate: 0.25% decrease 84,964 83,187 2,011 2,140
Discount rate: 0.25% increase 80,206 77,928 1,887 2,004
Salaries: 0.25% decrease 82,374 80,314 1,947 2,070
Salaries: 0.25% increase 82,637 80,617 1,947 2,070
Life expectancy: 1-year increase 83,177 81,415 2,040 2,169
Life expectancy: 1-year decrease 81,832 79,518 1,855 1,972
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements74
The contributions paid to defined contribution plans in the fiscal year amounted to CHF 6.3 million (prior year: CHF 5.5 million).
Comet grants length-of-service awards to its employees after a certain number of years of service, in the form of lump-sum payments that increase in amount with the number of years of employment. The provision for this item changed as follows in the year under review:
In thousands of CHF 2018 2017
Provision at January 1 1,330 1,192
Current service cost 202 161
Interest cost 12 11
Benefits paid (137) (104)
Actuarial (gains)/losses (13) 29
Foreign currency translation differences (26) 41
Provision at December 31 1,368 1,330
17.2 Defined contribution plans
17.3 Length-of-service awards
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements75
In thousands of CHF 2018 2017 1
Customers' contributions to development projects 2,136 2,674
Government grants 109 7
Income from the development of prototypes 1,508 968
Miscellaneous income 448 444
Total other operating income 4,201 4,093
1 Restated for IFRS 15 (see note 2.1).
In thousands of CHF 2018 2017
Wages and salaries 131,542 123,120
Employee benefits 21,588 22,166
Total staff costs 153,130 145,286
2018 2017
Number of employees (year-end) 1,346 1,435
Average full-time equivalents during the year 1,379 1,292
Development expenses comprise the costs of new-product development, im-provement of existing products, and process engineering. Comet’s development activities focus on the fields of vacuum technology, high voltage engineering and materials science, and on the further development of the divisions’ core products. In view of the uncertainty of future economic benefits that may flow from develop-ment projects, Comet as a rule does not capitalize development costs but charges them directly to the income statement.
At November 12, 2018, Comet transferred the ebeam systems business (a part of the EBT division) to a new owner, Tri-City Electric Co. in Davenport, Iowa, USA. The new owner acquired the following assets and assumed the following liabili-ties of the Davenport facility:
In thousands of CHF Carrying amount Nov. 12, 2018
Trade and other receivables 1,084
Inventories 10,546
Prepaid expenses 87
Total assets 11,717
Trade payables and contract liabilities (5,195)
Provisions (220)
Total liabilities (5,415)
Total net assets 6,302
Cash payment to new owner (293)
Book loss on transfer (6,595)
18 Other operating income
19 Staff costs and staff count
19.1 Staff costs
19.2 Staff count
20 Development expenses
21 Loss on disposal of busi-nesses
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements76
The loss on the transaction is tax-deductible. The tax effect was a reduction of CHF 1.7 million in tax expense.
In thousands of CHF 2018 2017
Amortization 5,255 3,963
Depreciation 8,510 8,074
Total amortization and depreciation 13,765 12,037
Impairment of intangible assets 5,400 429
Impairment of property, plant and equipment 666 –
Total impairment 6,066 429
Further information on the impairment charges related to the divestiture of the ebeam systems business in Davenport is provided in note 11.1.
In thousands of CHF 2018 2017
Interest expense 890 1,324
Losses on derivatives used for currency hedging 1,702 335
Foreign currency translation losses 6,794 5,312
Total financing expenses 9,387 6,971
In thousands of CHF 2018 2017
Interest income 30 14
Gains on derivatives used for currency hedging 647 1,586
Foreign currency translation gains 5,885 4,486
Total financing income 6,562 6,086
In thousands of CHF 2018 2017
Net interest expense 861 1,310
Net foreign currency translation losses/(gains) 1,964 (425)
Foreign currency translation gains and losses resulted largely from items denom-inated in US dollars and euros.
22 Amortization and depreciation
23 Financing income and expenses
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements77
Basic earnings per share represents the reporting period’s consolidated net in-come divided by the average number of shares outstanding.
2018 2017 1
Weighted average number of shares outstanding 7,757,904 7,750,232
Net income in thousands of CHF 12,279 35,336
Net income per share in CHF, diluted and basic 1.58 4.56
1 Restated for IFRS 15 (see note 2.1).
There are no outstanding stock options or stock subscription rights that could lead to a dilution of earnings per share.
As a global company, Comet is exposed to numerous legal risks. These can in-clude, especially, risks relating to product liability, patent law, export regulations, tax law and competition law. The outcomes of currently pending and future legal proceedings cannot be predicted with certainty. Expenses may therefore be in-curred that are not, or not fully, covered by insurance benefits and which may thus have effects on the business trajectory and on future financial results.
Provisions are established inasmuch as the financial consequences of a past event can be estimated reliably and the estimate can be confirmed by independent ex-pert opinion. Contingent liabilities that are likely to result in an obligation are in-cluded under provisions.
In 2006 Comet sold a property in Switzerland that is listed in the register of con-taminated sites. Although in the opinion of the experts involved, the situation was unlikely to change significantly in the short to medium term, it was obligatory to monitor the site regularly in recent years by means of test drilling. The groundwa-ter testing to date has not revealed any significant deterioration in the situation. The last planned round of drilling and sampling will therefore be conducted in spring 2019. If these groundwater samples do not show a further deterioration, all monitoring activities can be terminated as of the end of 2019. The site would then not require any further monitoring and would be deleted from the register of contaminated sites. A final assessment of the matter can probably be made in the course of 2019. However, based on the results of the groundwater sampling to date, Comet believes it is currently unlikely that any significant costs will be incurred.
24 Earnings per share
25 Off-balance sheet transactions
25.1 Contingent liabilities
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements78
In the course of its operating activities, Comet has concluded long-term rental and lease agreements resulting in payment obligations that come due as follows:
In thousands of CHF 2018 2017
Due within one year 5,021 4,461
Due within two to five years 8,361 10,135
Due in more than five years 45 –
Total payment obligations 13,427 14,596
The payment obligations arise from off-balance sheet operating leases for busi-ness premises and for road vehicles, office equipment and similar assets. The ex-pense recognized in the fiscal year for operating leases was CHF 6.0 million (prior year: CHF 5.0 million).
Fiscal year 2018In thousands of CHF Financial assets Financial liabilities
At fair value through profit
or loss
At amortized cost
At fair value through profit
or loss
At amortized cost
Fair value
Cash and cash equivalents 43,007 *
Trade receivables, net 53,382 *
Derivatives 26 379 353
Financial assets 209 *
Current debt 5,000 5,009
Trade and other payables 32,991 *
Non-current debt (fixed rate) 62,812 63,133
Total 26 96,599 379 100,803
Interest income/(expense) – 30 – (890)
Gain/(loss) on derivatives 647 – (1,702) –
Change in impairment and losses on trade receivables 467
Total net gain/(loss) recognized in the income statement 647 497 (1,702) (890)
* The carrying amount approximates fair value.
IFRS require all financial instruments which are held at fair value, and all reported fair values, to be categorized into three classes (or “levels”) according to whether the fair values are based on quoted prices in active markets (Level 1), on models using other observable market data (Level 2), or on models using unobservable inputs (Level 3).
25.2 Other off-balance sheet obli-gations
26 Financial instruments
26.1 Classes of financial instruments
Comet Holding AG | Annual Report 2018 | Comet Group Consolidated Financial Statements79
The only financial instruments that the Comet Group recognized at fair value were derivatives held for currency hedging. The measurement of the derivatives falls into Level 2 of the fair value measurement hierarchy under IFRS 13.
Fiscal year 2017 1
In thousands of CHF Financial assets Financial liabilities
Held for trading Loans and receivables
Held for trading At amortized cost Fair value
Cash and cash equivalents 60,420 *
Trade receivables, net 55,917 *
Derivatives 277 2 276
Financial assets 239 *
Current debt 2,132 2,173
Trade and other payables 41,696 *
Non-current debt (fixed rate) 65,733 68,364
Total 277 116,576 2 109,561
Interest income/(expense) 0 14 0 (1,324)
Gain/(loss) on derivatives 1,585 0 (335) 0
Change in impairment and losses on trade receivables (50)
Total net gain/(loss) recognized in the income statement 1,585 (36) (335) (1,324)
1 Restated for IFRS 15 (see note 2.1).* The carrying amount approximates fair value.
The only differences between fair values and carrying amounts occurred in fixed-rate debt. For the CHF 60 million bond, the quoted market price is used as the fair value (Level 1). The fair values of the other items of fixed-rate debt are determined by discounting the future cash flows at the interest rate prevailing at the year-end. The interest rate spreads used are those of the most recently obtained or refinanced loans.
Comet operates its own subsidiaries in a number of countries and also exports products to still other countries. As an international company, the Group is sub-ject to various financial risks which are inseparable from its business activities. Comet seeks to avoid unreasonable financial risks and to mitigate risks through appropriate hedges. The key elements of risk management form an integral part of Group strategy. Clearly defined management information and control systems are used to measure, monitor and control risks. Detailed risk reports are produced on a regular basis.
The primary goal of capital management is to manage equity and debt capital in such a way as to ensure the Group’s high creditworthiness and an equity ratio ap-propriate to the Group’s risk profile, thus supporting its business activities. Comet manages the Group’s capital structure to meet liquidity requirements and pursue growth and profitability targets, taking into account the economic environment and the financial results achieved and planned. On this basis, the Board of Direc-tors proposes dividend payments or capital repayments to the shareholders or recommends increases in capital stock.
26.2 Fair values of financial instruments
27 Management of financial risks
27.1 Capital management
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Comet monitors and evaluates its capital structure by reference to net debt and the equity ratio, with the aim of ensuring that the capital structure covers the busi-ness risks and assures the Group’s lasting financial flexibility.
In thousands of CHF 2018 2017 1
Current debt 5,000 2,132
+ Non-current debt 62,812 65,733
./. Cash and cash equivalents 43,007 60,420
Net debt 24,805 7,445
EBITDA 37,793 63,203
Debt ratio (net debt in relation to EBITDA) 0.7 0.1
Shareholders' equity 200,038 201,548
Equity ratio (equity in % of total assets) 54.4% 51.7%
1 Restated for IFRS 15 (see note 2.1).
Comet is exposed to many risks associated with financial instruments. These can be divided into market risks, credit risks and liquidity risks.
Market risk is the risk of changes in the price of financial assets, in currency ex-change rates, interest rates and the price of exchange-traded commodities. As a manufacturer, Comet is inherently exposed to commodity price risks (for exam-ple, for inputs such as energy, copper and ceramics), but these are not considered financial risks for the purposes of IFRS 7, as Comet procures commodities only for use in manufacturing, not for trading of commodity contracts. Consequently, these risks are not explicitly determined and are not separately disclosed in the consolidated financial statements.
Exchange rate riskWith its worldwide activities and strong focus on exports, Comet has particularly high exposure to exchange rate risks, as revenues and costs often do not arise in the same currency. The currency risk from operations is reduced by purchasing and selling in local currency where possible, an approach known as natural hedg-ing. In addition, to protect against fluctuation in exchange rates, significant for-eign currency orders in the X-Ray Systems division are already hedged on receipt of the order, using forward exchange contracts. The Industrial X-Ray Modules, ebeam Technologies and Plasma Control Technologies divisions non-selectively hedge a large portion of the expected cash flows in foreign currency up to a one-year time horizon, by means of forward exchange contracts. As Comet hedges only cash flows, there are no hedges of net investments in foreign operations. The table below shows the sensitivity of income before tax and of shareholders’ equity to a possible movement in those exchange rates that are material for Com-et, with all other variables held constant. The most important monetary foreign currency positions in the balance sheets of the Group companies are in euros and US dollars. The percentages of movement in exchange rates are based on an esti-mated potential range of fluctuation.
27.2 Risks in connection with financial instruments
27.2.1 Market risk
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Fiscal year 2018In thousands of CHF Increase in ex-
change rate in %Effect on income
before tax Effect on
equity
EUR / CHF +10 +1,272 +1,059
USD / CHF +10 +857 +1,379
Fiscal year 2017In thousands of CHF Increase in ex-
change rate in %Effect on income
before tax 1
Effect on equity 1
EUR / CHF +10 +2,061 +2,046
USD / CHF +10 +4,115 +1,950
1 Restated for IFRS 15 (see note 2.1).
A reduction in exchange rates of the same percentage amount produces an op-posite effect of equal size. The sensitivity analysis covers only monetary balance sheet items that, relative to the functional currency of the respective Group com-pany, are settled in foreign currencies.
Interest rate riskComet’s debt financing exposes it to the risk of interest rate fluctuation. As Com-et’s loans and bond carry fixed rates of interest, movements in market interest rates have no short-term effect on the amounts of interest payable and hence on the income statement. All loans are measured at amortized cost; consequently, in the year under review and the prior year, changes in market interest rates did not have an effect on the carrying amounts of the loans, nor therefore on income before tax or on equity. The fair values of long-term debt based on the current interest rate situation are presented on an indicative basis in note 26.1.
Credit risk is the risk that a counterparty will not be willing or able to meet its ob-ligations. To mitigate this risk, Comet deals with multiple well-established banks and spreads the credit risk as widely as necessary and reasonable.
Banking transactions: Comet spreads its cash holdings among different banks in order to minimize the potential for losses from credit risk. Banking transactions are conducted only with reputable banks of national and international standing. The types of transactions in which subsidiaries are permitted to engage is deter-mined centrally. The following table shows the amounts held at the most import-ant counterparties at the balance sheet date:
2018 2017
In thousands of CHF Rating * Balance Rating * Balance
Bank A A+ 23,434 A+ 17,420
Bank B AAA 42 AAA 9,025
Bank C A 2,458 A 4,289
Bank D N/A 16 N/A 9,554
Bank E A- 6,157 A- 9,407
Bank F A+ 5,093 A+ 5,445
Other counterparties 5,807 5,280
Total bank deposits 43,007 60,420
* Long-term credit rating from Standard & Poor’s.
27.2.2 Credit risk
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Trade receivables: Comet operates worldwide, selling its products in various countries and to a large number of customers. Payment terms vary according to the market and customer. The credit limits and payment receipts for each cus-tomer are monitored by the individual Group companies and the resulting infor-mation is made available to Group management in the form of monthly special reports. Appropriate allowance for expected risk of default is made through the recognition of impairment on doubtful accounts. Receivables and contract assets are written off only when payment is highly unlikely to be forthcoming. Detailed information on impairment of receivables and contract assets and its movement in the year can be found in note 5.
The amount of exposure to credit risk equals the carrying amount of the respec-tive financial instruments in the balance sheet.
Comet defines liquidity risk as the risk that, at any time, the Group will not be able to meet its financial obligations fully as they become due. The foremost goal of financial management is the permanent assurance of the Group’s solvency in order to prevent such a contingency. To this end, using liquidity planning, Comet always maintains sufficient liquid assets and credit lines to avoid shortages of li-quidity. Ensuring solvency also includes active working capital management. The Group’s credit quality is safeguarded by monitoring the leverage ratio of net debt to EBITDA. Liquidity planning and liquidity procurement are to a large extent per-formed centrally for the whole Group. A rolling three-month cash flow forecast is prepared monthly based on a decentralized, bottom-up approach. The long-term financing of subsidiaries is normally arranged through loans of Comet Holding AG. Following is an overview of all contractual payment obligations as at the bal-ance sheet date, on an undiscounted basis:
Fiscal year 2018In thousands of CHF Carrying amount Payments due by period
Total 2019 2020 – 2023 After 2023
Current and non-current debt 67,812 71,627 6,275 65,352 –
Financial liabilities 32,991 32,991 32,991 – –
Derivatives (negative fair values) 379 379 379 – –
Total 101,182 104,997 39,646 65,352 –
Fiscal year 2017 1
In thousands of CHF Carrying amount Payments due by period
Total 2018 2019 – 2022 After 2022
Current and non-current debt 67,865 73,161 3,532 69,629 –
Financial liabilities 41,696 41,696 41,696 – –
Derivatives (negative fair values) 2 2 2 – –
Total 109,563 114,859 45,230 69,629 –
1 Restated for IFRS 15 (see note 2.1).
27.2.3 Liquidity risk
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Current and non-current debt represents both the principal amounts of these bor-rowings and the contractual interest payments.
The key assumptions of the above summary of payment obligations are: ■ For variable-rate debt, the interest rates at the balance sheet date are used. ■ All amounts denominated in foreign currencies are translated at the rate pre-
vailing at the balance sheet date. ■ The maturity date assumed is the earliest possible.
The contract amounts of open derivative positions are presented in note 6.3.
The capital stock at January 1, 2018 was CHF 7,753,658, divided into 7,753,658 registered shares with a par value of CHF 1.00 per share.
In fiscal year 2018 the capital stock was increased by 6,224 shares from the por-tion of authorized capital designated for equity-based compensation. Including the increase of 6,224 shares from this portion of authorized capital, Comet Holding AG at December 31, 2018 thus had a new total of CHF 7,759,882 of capital stock, divided into 7,759,882 registered shares with a par value of CHF 1.00 per share. The capital stock is fully paid in.
At its meeting on August 9, 2018 the Board of Directors established that the cap-ital increase from authorized capital for equity compensation was properly per-formed. The information in the commercial register, and the Bylaws of Comet Holding AG, were updated to reflect the change in capital stock.
2018 2017
Number of shares
Par value in CHF
Number of shares
Par value in CHF
January 1 7,753,658 7,753,658 7,745,430 7,745,430
Increase in capital from the portion of authorized capital des-ignated for equity compensation 6,224 6,224 8,228 8,228
December 31 7,759,882 7,759,882 7,753,658 7,753,658
At the balance sheet date, Comet Holding AG held no treasury stock (prior year: none).
Under section 3b of its Bylaws, a portion of the Company’s unissued authorized capital is designated for use only as equity-based compensation (in German this portion is known as “bedingtes Aktienkapital”). In such a capital increase, stock is issued to Executive Committee members and / or Board members of Comet Hold-ing AG. With respect to this portion of authorized capital, the other shareholders’ pre-emptive rights are excluded. The issuance of stock or stock subscription rights is based on a compensation plan (in the form of a written regulation) adopted by the Board of Directors.
28 Equity capital structure and shareholders
28.1 Capital stock
28.2 Authorized capital for equity compensation
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In May 2018, in accordance with the compensation plan, the members of the Board of Directors were granted a total of 1,141 shares of stock in payment of CHF 153,750 of fixed retainers due for fiscal year 2017. In addition, as part of their compensation for 2018, the members of the Board of Directors were granted a total of 568 shares in payment of CHF 76,538 of fixed retainers due for the peri-od from January 1, 2018 to the 2018 Annual Shareholder Meeting. The fully paid shares were applied to the retainers due at a price of CHF 134.75 per share.
Members of the Executive Committee were granted a total of 4,515 shares in pay-ment of CHF 608,396 of profit-sharing compensation due for fiscal year 2018. The fully paid shares were applied to the compensation due at a price of CHF 134.75 per share.
As a result of these grants of a total of 6,224 shares made in 2018, the Company’s unissued authorized capital for equity-based compensation showed the following movement:
2018 2017
Number of shares
Par value in CHF
Number of shares
Par value in CHF
January 1 209,462 209,462 217,690 217,690
Increase in capital (awards toBoard of Directors for priorterm’s retainer and to ExecutiveCommittee for prior year’sprofit-sharing compensation) (6,224) (6,224) (8,228) (8,228)
December 31 203,238 203,238 209,462 209,462
At the end of the year, the remaining unissued authorized capital for equity-based compensation was CHF 203,238, or 2.6% of the existing capital stock.
At December 31, 2018, in addition to shares outstanding and to unissued autho-rized capital for equity compensation, the Company had unissued authorized cap-ital for purposes set out in section 3a of the Bylaws (in German: “genehmigtes Aktienkapital”). The Board of Directors is authorized, at any time until April 26, 2020, to increase the capital stock by a maximum of CHF 1.4 million by issuing up to 1,400,000 fully payable registered shares with a par value of CHF 1.00 per share, which represents 18% of the existing capital stock. Increases by firm commitment underwriting and increases by part of the total authorized amount are permitted. The amount of the respective issue, the date when entitlement to dividend com-mences, the terms of any exercise of pre-emptive rights and the nature of the contributions are determined by the Board of Directors.
The Board of Directors is authorized to exclude shareholders’ subscription rights and assign these rights to third parties if the shares in question are to be used for the acquisition of companies via equity swaps or to finance the cash purchase of companies or parts of companies, or to finance new investment projects of Comet Holding AG, or for providing an ownership interest to an industrial partner (either in order to cement a strategic alliance or in the event of a takeover offer for the Company). Stock for which pre-emptive rights are granted but not exercised must be sold by the Company at market prices.
28.3 Authorized capital for other capital increases
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At December 31, 2018 the Company, according to disclosure notifications, had the following significant shareholders (defined for this purpose as holding voting rights in excess of 3% of the Comet capital stock recorded in the Swiss commer-cial register of companies):
Beneficial owner Direct shareholder Share of voting rights as dis-
closed by share-holders
Haldor Foundation Tringle Investment Pte Ltd 10.13%
N/AVERAISON SICAV – Engagement Fund 7.29%
Pictet Asset Management SA (Direction de Fonds) 5.07%
UBS Fund Management (Switzerland AG) 3.63%
Credit Suisse Funds AG 3.01%
The Company has not been notified of nor is aware of any other shareholders that held more than 3% of its shares. To the best of the Company’s knowledge, there were no voting pool agreements.
With an effective date of January 9, 2019, VERAISON has announced an increase in its voting rights to a share of 10.04%.
Main elements of the compensation systemThe remuneration of the members of the Executive Committee consists of fixed compensation and a performance-based component. The total compensation takes into account the recipient’s position and level of responsibility.
The profit-sharing remuneration of the members of the Executive Committee con-sists of compensation under a short-term incentive plan (STIP) and a long-term in-centive plan (LTIP). Two-thirds of the compensation under the STIP is paid in cash and one-third of it is paid in stock. The compensation under the LTIP is paid only in stock. The total variable compensation (STIP and LTIP combined) is capped by an upper limit. The profit-sharing compensation of employees who are not members of the Executive Committee is paid only in cash.
Share-based compensation of the members of the Board of DirectorsTo ensure the independence of the Board of Directors in its supervision of the Executive Committee, the Board members receive only a fixed retainer, of which two-thirds is paid in cash and one-third is paid in stock. The stock awarded is sub-ject to a holding period of three years during which it cannot be sold.
Share-based compensation of the members of the Executive CommitteeIn addition to the fixed compensation, the members of the Executive Committee can earn a performance-related, STIP pay component, of which one-third is paid in stock. The balance of the STIP amount is paid in cash. Additionally, further stock compensation can be granted, under the LTIP. The stock transferred under the STIP is subject to a holding period of three years from the date of the award. Stock transferred under the LTIP does not have a holding period.
28.4 Significant shareholders
29 Share-based payments
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Calculation of grant price for share awardsThe grant price, at which the stock is awarded and transferred to recipients, is the average closing market price of the stock in the period between (and excluding) the date of the annual results press conference and the date of the Annual Share-holder Meeting.
Expenses recordedThe expense recognized for share-based payments in the year under review was CHF 0.3 million (prior year: CHF 0.9 million). The amount included CHF 0.1 million for stock already awarded to the Board of Directors in 2018.
The expense for compensation of the members of the Executive Committee and Board of Directors can be analyzed as follows:
in thousands of CHF 2018 2017
Cash compensation, including short-term employee benefits 4,064 4,206
Contributions to post-employment benefit arrange-ments 416 355
Expense for share-based payments 349 916
Total compensation 4,830 5,477
The 2018 expense of CHF 349 thousand for share-based payments was CHF 72 thousand less than the corresponding addition of CHF 421 thousand to equity shown in the consolidated statement of changes in equity (prior year: CHF 36 thousand more than the corresponding addition to equity). The difference arises from the accrual accounting for the share-based payments expense, from the ef-fective capital increase and from the issuance stamp duty that was payable on the capital increase and charged directly to additional paid-in capital.
Additional compensation of Board membersIn the fiscal year, the law firm Bär & Karrer AG, Zurich, billed fees in the amount of CHF 8 thousand for consulting services. Mariel Hoch, a member of Comet’s Board of Directors, is a partner at this law firm. In the prior year, no services were obtained from or invoiced by members of the Board of Directors or their related parties.
There have been no events after the balance sheet date with a material effect on the amounts in the consolidated financial statements.
The Board of Directors will propose at the Annual Shareholder Meeting to pay a distribution to shareholders of CHF 1.00 per share from distributable paid-in cap-ital (prior year: CHF 1.50) and of CHF 0.20 per share from retained earnings (prior year: nil). The total amount of the proposed distribution is CHF 9.3 million (prior year: CHF 11.6 million).
The Board of Directors released these annual financial statements on March 7, 2019 for publication and will present them to shareholders for approval at the An-nual Shareholder Meeting on April 25, 2019.
30 Compensation of the Board of Directors and Executive Committee
31 Events after the balance sheet date
32 Proposed distribution to shareholders
33 Release of the consolidated financial statements for publication
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Ernst & Young Ltd Schanzenstrasse 4a P.O. Box CH-3001 Berne
Phone: +41 58 286 61 11 Fax: +41 58 286 68 18 www.ey.com/ch
To the General Meeting of Comet Holding Ltd., Flamatt
Berne, 7 March 2019
Statutory auditor’s report on the audit of the consolidated financial statements
Opinion We have audited the consolidated financial statements of Comet Holding Ltd. and its sub-sidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2018 and the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity for the year then ended, and notes to the consolidated financial state-ments, including a summary of significant accounting policies. In our opinion, the consolidated financial statements (pages 35 to 86) give a true and fair view of the consolidated financial position of the Group as at 31 December 2018, and its con-solidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.
Basis for opinion We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Auditing Standards. Our responsibilities under those provisions and stan-dards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the re-quirements of the Swiss audit profession, as well as the IESBA Code of Ethics for Professio-nal Accountants, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters Key audit matters are those matters that, in our professional judgment, were of most signifi-cance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond
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to our assessment of the risks of material misstatement of the consolidated financial state-ments. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the consolidated financial state-ments.
Impairment of intangible assets – goodwill and other
Risk The group reviews the carrying amount of its cash generating units annually or more frequently if any impairment indicators are present with respect to goodwill or other intangible assets with indefinite useful life (trademarks). The impairment assessment involves performing a comparison of the estimated recoverable amount (fair value or higher net present value of each cash-generating unit) to its carrying amount. These annual impairment tests were significant to our audit because the balances for goodwill and trademarks of CHF 29.2 million as of 31 De-cember 2018 are material to the financial statements. Furthermore, the underlying estimations to the impairment assessment are complex and any impairment of goodwill, trademarks or other intangible and tangible assets can have a material impact on the net income of the Comet Group. The valuation also depends on assumptions regarding the future development of the business and on judgments made by management. The impairment tests are complex and described in Note 11. The reco-verable amount calculated via discounted cash flow analysis that is based on various assumptions such as future cash flows, terminal value growth rates, inflation rate and discount rate (WACC) of each cash-generating unit. These assumptions are determined by management and are therefore considered to be material judgments.
Our audit approach
We assessed the assumptions made in the impairment tests and invol-ved our own valuation specialists to test the accuracy of the impairment calculation. We compared the terminal value growth rate as well as the inflation rate with externally available data and also checked the clerical accuracy of the model. In addition, we evaluated the estimates made by management in previous years in terms of the actual income generated, as well as assessed management’s process for identifying possible im-pairments. Moreover, we evaluated the disclosures regarding impair-ment testing on goodwill and intangible assets with indefinite useful life with regard to the assumptions made. Our audit procedures did not lead to any reservations concerning the measurement of intangible assets – goodwill and other.
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Recognition of provisions resulting from claims
Risk As outlined in notes 16 and 25.1 of the consolidated financial state-ments, Comet is exposed to potential claims and litigation in a variety of areas and counterparties. These areas include a former owner of a group company, tax authorities, other authorities and other third parties. Provisions, particularly for individual claims made against Comet, involve a high level of judgment as it is often uncertain if, when and to what extent such claims result in cash outflows. A provision has been raised based on management’s best estimate of the likely outflow.
Our audit approach
We assessed Comet’s process for identifying and monitoring new or pending claims. We inquired with both financial and legal staff, as well as outside attorneys that were engaged by Comet. Moreover, we read minutes of the Board of Directors and the Audit Committee and dis-cussed open cases with management. Finally, we read legal letters that were provided by external attorneys or other parties that supported Comet in such cases. For recurring claims such as warranties, we assessed the provision based on the historical accuracy to assess the amount recorded in the current year. We also assessed the accounting for any change in the current year. Our audit procedures did not lead to any reservations concerning the completeness and measurement of the provisions resulting from claims.
Other information in the annual report The Board of Directors is responsible for the other information in the annual report. The other information comprises all information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements, the remuneration report and our auditor’s reports thereon. Our opinion on the consolidated financial statements does not cover the other information in the annual report and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information in the annual report and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our know-ledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibility of the Board of Directors for the consolidated financial statements The Board of Directors is responsible for the preparation of the consolidated financial state-ments that give a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
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In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of the consolidated financial state-ments is located at the website of EXPERTsuisse: http://www.expertsuisse.ch/en/audit-report-for-public-companies. This description forms part of our auditor’s report.
Report on other legal and regulatory requirements In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved.
Ernst & Young Ltd
Roland Ruprecht Philippe Wenger Licensed audit expert Licensed audit expert (Auditor in charge)